NEW YORK (TheStreet) -- On Aug. 1 the Dow Transportation Average set a new all-time high at 6686.86 despite having a sector rating of "avoid-source of funds." The transportation sector has this rating because 70% of all stocks in this sector have sell or strong sell ratings according to www.ValuEngine.com.The Dow Jones Industrial Average set its all-time high at 15,658.43 on Aug. 2, and 14 stocks in this benchmark index have buy ratings, as I noted on Aug. 1 in " August Begins With New Highs and New Risky Levels." These stocks still have buy ratings today. I have been suggesting that investors allocating cash to the stock market focus on the buy-rated Dow components with 50% of investment dollars in cash. The S&P 500 set its all-time high at 1709.67 on Aug. 2, and 139 stocks, or just 27.8% of these stocks have buy ratings. A warning is that only 15 of these stocks are undervalued.
Here's a risk/reward table for the major equity averages for the remainder of 2013:
This table shows the upside percentage to semiannual risky levels and the downside risk to the annual value levels. For example, the upside potential for the Dow Industrial Average is 6.4%, while the downside risk is 18.1%. My suggested allocation to the stock market begins with at least 50% in cash. Allocations to specific stocks should include companies among the following sectors, as well as the buy-rated Dow components. INTC) ($22.45) has a buy rating, according to ValuEngine. Recent weakness is approaching its 200-day simple moving average at $22.16. My annual value level is $19.60, with a quarterly risky level at $25.38. Microsoft ( MSFT) ($32.89) has a buy rating and is between its 200-day SMA at $30.05 and its 50-day SMA at $33.89. My annual value levels are $28.57 and $27.92, with quarterly and semiannual risky levels at $33.52 and $33.95, respectively. Consumer Staples -- Overweight: There are two buy-rated Dow components in this sector. Multi-Sector Conglomerates -- Overweight: There are three buy-rated Dow components in this sector. Retail-Wholesale -- Overweight: There are three buy-rated Dow components in this sector. I favor these two: McDonalds ( MCD) ($98.04) has a buy rating and is below its 50-day SMA at $98.72, with the 200-day SMA at $95.43. My semiannual and annual pivots are $98.47 and $99.38, respectively, with an annual risky level at $104.63. Wal-Mart ( WMT) ($77.25) has a buy rating and is above its 50-day and 200-day SMAs at $76.30 and $73.80, respectively. My monthly value level is $76.14 with a quarterly risky level at $82.06. Utilities -- Overweight: There are two buy-rated Dow components in this sector. I favor this one: AT&T ( T) ($35.29) has a buy rating and is below its 50-day and 200-day SMAs converged at $35.53 and $35.54. My semiannual value level is $32.14 with a quarterly pivot at $36.27 and monthly risky level at $36.87.
Here are four more candidates to consider, two from the computer and technology sector, and two from the retail-wholesale sector: Broadcom ( BRCM) ($26.30) has a buy rating as the stock slips to a new multiyear low at $26.30. My annual pivots are $30.97 and $32.91. Cirrus Logic ( CRUS) ($19.91) has a buy rating and is above its 50-day SMA at $18.46 with the 200-day SMA at $24.31. My annual value level is $13.35 with an annual risky level at $20.74. Dollar Tree ( DLTR) ($53.30) has a buy rating with its 50-day SMA at $51.66. My semiannual value level is $52.56 with a monthly pivot at $53.35 and a quarterly risky level at $59.83. Ross Stores ( ROST) ($67.13) has a buy rating with a 50-day SMA at $65.80. My annual value levels are $54.55 and $51.52, respectively, with a monthly risky level at $67.94. At the time of publication, the above stocks are in the model portfolio of Suttmeier's subscription product called The ValuTrader Model Portfolio. Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.