This has been the year for the Dow Jones 30, which is up 15% for the year to date and is beating the S&P 500 and Nasdaq indexes handily. Although we would like to celebrate this flight to quality, many of the Dow 30 component stocks now appear fully valued relative to the total market.

So where's next year's bull market in the Dow?

We like the idea of investing in companies that can make competition irrelevant by developing new products and markets, and have growing global businesses and strong balance sheets.

Searching through the Dow 30, we found three stocks meeting that description:

Johnson & Johnson

(JNJ) - Get Report

,

American Express

(AXP) - Get Report

and

DuPont

(DD) - Get Report

.

Johnson & Johnson is up 12% since the beginning of the year. This pharmaceutical giant currently trades at 16.5 times the consensus forecast for 2007 earnings per share, which calls for conservative growth of 8%, in line with its peers. And like its peers, J&J faces potential challenges to its top drugs, Risperdal and Topamax, from generics. What makes it different from it peers is the fact that it's likely to be able to sustain this earnings growth.

J&J has a diversified portfolio of business lines. International sales accounted for 43% of the total for the first nine months of 2006, and the company has the capital to make opportunistic acquisitions.

Pending acquisitions will fuel J&J's earnings growth.

On Monday the European Commission approved the company's proposed $16.6 billion purchase of Pfizer's consumer health business. This would make J&J the world's largest supplier of consumer health care and over-the-counter medicines. The acquisition could also bring an estimated $600 million in savings a year through cost reductions starting in 2009.

How 'Bout Now Dow?
Stocks that look set to outperform

How these stocks have fared against the Dow.

Source: TheStreet.com Ratings

Strategic acquisitions are also strengthening J&J's new-product pipeline. The company's recently announced plans to acquire Conor Medsystems, which produces the CoStar Stent, will broaden its current $4 billion stent portfolio and add next-generation technology.

Although the benefits of these acquisitions may take time to flow to the bottom line, J&J has not been shy about using its sizeable cash position to benefit shareholders in the meantime. In 2006, it completed $2.2 billion of a $5 billion general share repurchase plan.

Look for more good news from J&J. The company expects to report year-end earnings on Jan. 23, 2007.

American Express is an unusual pick among financial services companies. Most of our past commentary in this sector focused on the interest rate-sensitive, lending-centric banks like

Citigroup

(C) - Get Report

or

JPMorgan Chase

(JPM) - Get Report

.

But American Express' business model is unique in the industry in that it earns fees on credit card transactions, whereas its peers rely on fees from revolving balances. These fees are borne by the merchant, not the consumer, which tends to boost customer loyalty and encourage larger and more frequent purchases, further differentiating the company from the banks and from rival payment networks such as Visa and

MasterCard

(MA) - Get Report

.

American Express is very much a global brand. In the last quarter, international billings were up 20% year over year. Non-U.S. business income now constitutes 40% of net income.

Where else can you find a company with low leverage, return on equity of 33% to 36%, and 13% revenue growth that is selling at only 17 times projected earnings? On top of this, future earnings growth prospects also look good.

Management also recently upped growth and profit guidance. American Express shares have gained 16.4% in the year to date and hit a new high last week of $60. The company expects to report year-end earnings on Jan. 23, 2007.

DuPont is the largest U.S. chemical company, with a diversified range of product lines. It makes the favorite list for its well-above-average 24% return on equity, 12% earnings estimated growth for next year and a 3% dividend yield -- all for a stock that only trades at 15 times projected earnings.

Product innovations create new markets and earnings opportunities. DuPont has a very strong research-and-development pipeline and expects to generate more than a third of 2006 revenue, $9 billion, from products introduced in the past five years. Among the many interesting new introductions and applications are corn-derived propanediol products that can be used as an ingredient in carpet cleaners, antifreeze and detergents.

On Monday the company's agricultural and nutrition unit said it would close or streamline manufacturing units and cut 1,500 jobs globally as it shifts from low-growth nutrition and crop protection businesses, reinvesting the annual $100 million in savings it expects from the restructuring into higher-growth opportunities in its corn seed breeding business. It expects to book a $200 million charge for the restructuring in the fourth quarter of this year.

Other showcase products include biofuels, photovoltaics, and advanced filtration aimed at high-growth, high-margin commercial markets.

DuPont is also well positioned to benefit from global growth. Revenues from outside the countries with the seven biggest economies have grown at an average rate of 17% over the last five years and now total 36% of total revenues.

Dupont shares have returned 15% in the year to date. The company expects to report year-end earnings on January 23, 2007.

So if you are thinking of the Dow 30 stocks as stodgy, Old Economy companies, think again.

As originally published, this column contained an error. Please see

Corrections and Clarifications.

Rudy Martin is the director of research for TheStreet.com Ratings. In keeping with TSC's Investment Policy, employees of TheStreet.com Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

In keeping with TSC's Investment Policy, employees of TheStreet.com Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

While Martin cannot provide investment advice or recommendations, he appreciates your feedback;

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