13 Buy-Rated Dow Stocks Now Include Microsoft and J&J

NEW YORK (TheStreet) -- As investors consider investment strategies for 2014, I favor allocations to buy-rated stocks in the Dow Industrial Average. In my judgment buy-rated Dow stocks should be considered a part of a portfolio rebalancing strategy where investors take huge profits on stocks on positions set a year ago or back to the lows of March 2009. My concept of rebalancing locks in gains and reduces total dollars invested back to the dollars in the market at the end of 2012.

On Dec. 6 I wrote, Cisco and Intel Are Buy-Rated Dow Stocks to Own and there were 14 buy rated Dow components. Today there are 13 but there are five name changes. General Electric (GE), IBM (IBM) and Intel (INTC) are no longer buy-rated and Johnson & Johnson (JNJ) and Microsoft (MSFT) have recently been upgraded to buy from hold.

Here are my buy-and-trade profiles for the 12 buy-rated Dow stocks:

Cisco Systems (CSCO)($22.31 vs. $20.91 on Dec. 5 up 6.7%) traded as low as $20.22 on Dec. 13 and moved above its 50-day simple moving average at $21.84 on Dec. 27 and is below its 200-day SMA at $23.08. The stock is 12.3% overvalued with a gain of 10% over the last 12 months with a 12 month trailing earnings-per-share ratio at 11.9. Cisco has a positive weekly chart profile with its five-week modified moving average at $21.87 after testing its 200-week SMA at $20.23 at the Dec. 13 low. My weekly value level is $19.35 with a semiannual pivot at $21.96 and annual risky levels at $23.38 and $26.76. Quarter and monthly risky levels are between the annual levels at $24.27 and $25.62.

General Electric ($27.29 vs. $26.45 on Dec. 5 up 3.2%) has recently been downgraded to hold from buy so buy-and-trade investors should shift allocations in General Electric into another buy-rated Dow stock.

Home Depot (HD)($81.50 vs. $78.54 on Dec 5 up 3.8%) traded to a new all-time intra-day high at $82.57 on Jan. 2 with the stock above its 50-day and 200-day SMAs at $79.10 and $76.70. The stock is 10.7% overvalued with a gain of 29.7% over the last 12 months with an elevated 12 month trailing P/E ratio at 21.9. Home Depot has a positive but overbought weekly chart profile with its five-week MMA at $80.18 in a parabolic formation. My semiannual value level is $75.25 with a semiannual pivot at $81.82 and monthly risky level at $84.15.

IBM ($189.71 vs $176.08 on Dec. 5 up 7.7%) has recently been downgraded to hold from buy so buy-and-trade investors should shift allocations in IBM into another buy-rated Dow stock.

Intel ($25.58 vs. $24.26 on Dec. 5 up 5.4%) has recently been downgraded to hold from buy so buy-and-trade investors should shift allocations in Intel into another buy-rated Dow stock.

Johnson & Johnson ($94.29 vs. $92.97 on Dec. 5 up 1.4%) traded to a new all-time intra-day high at $95.99 on Nov. 25 and the stock dipped below its 50-day SMA on Dec. 12 to $89.77 on Dec. 18. The stock is now above its 50-day and 200-day SMAs at $93.22 and $88.82. The stock is 19.9% overvalued with a gain of 32.1% over the last 12 months with a 12 month trailing P/E ratio at 17.2. J&J has a neutral weekly chart profile with its five-week MMA at $92.84 with declining momentum. My semiannual and annual value levels are $83.76, $82.19 and $81.60 with a quarterly pivot at $92.15 with a monthly risky level at $94.12.

Coca Cola (KO)($40.39 vs. $39.83 on Dec. 5 up 1.4%) has been back above its 200-day SMA at $40.14 since Dec. 24 with a high of $41.38 on Dec. 31. The stock is 9.9% overvalued with a gain of 8.3% over the last 12 months with a 12 month trailing P/E ratio at 19.3. Coke has a neutral weekly chart profile with its five-week MMA at $40.12 with declining momentum. My monthly value level is $36.36 with quarterly and semiannual risky levels at $43.64, $44.67 and $45.83.

McDonald's (MCD)($96.38 vs. $95.43 on Dec. 5 up 1.0%) has been below its 200-day SMA at $97.93 since Nov. 27 and traded as low as $94.04 on Dec. 12. The stock is 4.6% overvalued with a gain of 6% over the last 12 months with a 12 month trailing P/E ratio at 17.3. McDonald's will have a positive weekly chart profile with a close this week above its five-week MMA at $96.38. Otherwise the risk is to the 200-week SMA at $87.44. My monthly and quarterly value levels are $91.68 and $89.79 with an annual risky level at $106.59.

3M (MMM)($137.65 vs. $126.83 on Dec. 5 up 8.5%) set a new all-time intra-day high at $140.43 on Dec. 31. The stock is 34% overvalued with a gain of 44.2% over the last 12 months with a 12 month trailing P/E ratio at 20.5. 3M has a positive but overbought weekly chart profile with its five-week MMA at $133.62 in a parabolic formation. My quarterly and semiannual value levels are $135.97 and $130.25 with a monthly risky level at $141.93.

Microsoft ($36.41 vs. $38.00 on Dec. 5 down 4.2%) set a multi-year intra-day high at $38.98 on Dec. 4 then as low as $35.53 on Dec. 18. The stock is 29.7% overvalued with a gain of 36.4% over the last 12 months with a 12 month trailing P/E ratio at 14.0. Microsoft has a negative weekly chart profile with a weekly close below its five-week MMA at $36.80 with declining momentum. My semiannual and annual value levels are $34.59, $34.02, $30.95 and $29.42 with monthly and quarterly risky levels at $37.19 and $38.61.

Procter & Gamble (PG) ($81.42 vs. $82.69 on Dec. 5 down 1.5%) set a new all-time intra-day high at $85.82 on Nov. 25 and weakness to $80.30 is above the 200-day SMA at $79.81. The stock is 19.4% overvalued with a gain of 18.7% over the last 12 months with a 12 month trailing P/E ratio at 20.2. P&G has a negative weekly chart profile with a weekly close below its five-week MMA at $81.87 with declining momentum. My annual and semiannual value levels are $78.13 and $77.93 with annual and semiannual pivots at $80.32 and $82.85 and weekly risky level at $83.19.

AT&T (T) ($34.95 vs. $34.25 on Dec. 5 up 2%) has been trading back and forth around its 200-day SMA at $35.47. The stock is 4.6% overvalued with a loss of 1.2% over the last 12 months with a 12 month trailing P/E ratio at 14.2. AT&T has a positive weekly chart profile with a weekly close above its five-week MMA at $34.81. My monthly value level is $32.55 with semiannual risky levels at $36.48 and $38.09.

United Health (UNH)($76.51 vs. $72.75 on Dec. 5 up 5.2%) set a new all-time intra-day high at $77.32 on Jan. 7. The stock is 19.4% overvalued with a gain of 46.9% over the last 12 months with a 12 month trailing P/E ratio at 13.9. United Health has a positive but overbought weekly chart profile with its five-week MMA at $73.84. My semiannual pivots are $79.65 and $75.19 with a monthly risky level at $81.77.

United Technologies (UTX)($113.51 vs. $109.05 on Dec. 5 up 4.1%) set its all-time intra-day high at $113.94 on Dec. 31. The stock is 17% overvalued with a gain of 34.2% over the last 12 months with a 12 month trailing P/E ratio at 18.7. United Tech has a positive but overbought weekly chart profile with its five-week MMA at $111.04 in a parabolic formation. My annual and semiannual value levels are $104.87 and $104.66 with semiannual and quarterly pivots at $112.24 and $113.70 and a monthly risky level at $118.94.

Verizon (VZ) ($49.30 vs. $48.91 on Dec. 5 up 0.8%) is poised below its 200-day SMA at $49.65. The stock is 2.3% undervalued with a gain of 10.3% over the last 12 months with a 12 month trailing P/E ratio at 17.4. Verizon has a negative weekly chart profile with its five-week MMA at $48.99 with declining momentum. My Quarterly and semiannual value levels are $53.55 and $50.04 with a monthly risky level at $57.79.

Wal-Mart (WMT) ($78.45 vs. $79.44 on Dec. 5 down 1.2%) set a new all-time multi-year high at $81.37 on Dec. 4 then declined to $77.20 on Dec.19 with the 200-day SMA at $76.66. The stock is 10.5% overvalued with a gain of 14.7% over the last 12 months with a 12 month trailing P/E ratio at 15.1. Wal-Mart has a negative weekly chart profile given a close this week below its five-week MMA at $78.32. My semiannual value levels are $76.49 and $75.89 with a quarterly risky level at $85.49.

At the time of publication the author held no positions in any of the stocks mentioned.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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