Time to Trade Up to Dow Stocks

BOSTON (TheStreet) -- Low-quality stocks led this summer's rally, which pushed the Russell 2000 Index up 21% in three months. As fears of a market correction gain momentum, it's time to trade up to safer, established names.

Our quantitative model, which ranks stocks based on fundamentals and price performance, is optimistic about the Dow Jones Industrial Average. It rates 19, or 63%, of Dow components "buy." None of the companies have "sell" recommendations.

In contrast, only 18% of the 5,000 stocks we follow have "buy" ratings, while 45% fall into the "sell" category. Our "sell"-list, which includes Citigroup(C Quote) and Freeport-McMoRan Copper & Gold(FCX Quote), is a who's who of high flyers.

Interactive stock table

The mega-cap Dow has lagged this year, rising 12% compared with 18% for the S&P 500 Index and 35% for the Nasdaq. However, the industrials are gaining speed, hitting a high for the year on Friday. These stocks are also cheaper and safer than smaller companies, and pay steady dividends.

Some say the rally has another leg that will be catalyzed by growth in quality stocks. Others consider the market's performance out of sync with economic conditions, suggesting a decline could be coming.

Either way, blue chips are your best bet if you're going long. If the rally continues, they're due for a boost. If the market declines, they have safe-haven appeal.

Dow members offer attractive fundamentals. We give its 30 components an average financial strength score of 7.9 out of 10, higher than the "buy"-list average of 7.1. Our financial strength scores gauges companies' liquidity, debt management and business stability. Our overall scores reflect risk-adjusted performance, or how much a stock rises relative to its inherent risks.