NEW YORK ( TheStreet) - There are good stocks to buy and then there is a group of stocks that can be considered the best of the best in the investing world.
Now 119 years old, the Dow Jones Industrial Average is the second oldest stock market index and the stocks in this index make up some of the largest and influential companies in the U.S., representing about one quarter of the value of the entire U.S. stock market. Recently Apple (AAPL) made big news when it was added to the Dow in March, representing a new era of influential technology companies, replacing old-school telecom AT&T (T).
Of the 30 stocks within the DJIA, these six stocks are top rated.
The stocks on this list are all rated Buy, with an A or A+ rating. Check out which stocks are the best of the best. And when you're done be sure to check out the nine S&P 500 stocks to sell.
TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Note: Year-to-date returns are based on June 19, 2015 closing prices.CSCO data by YCharts
1. Cisco Systems Inc. (CSCO)
Industry: Technology/Communications Equipment
Market Cap: $147.6 billion
Rating: Buy, A
Year-to-date return: 4.3%
Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol (IP) based networking products and services related to the communications and information technology industry worldwide.
TheStreet said: "We rate CISCO SYSTEMS INC (CSCO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, notable return on equity, reasonable valuation levels and increase in net income. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CSCO's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 5.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, CISCO SYSTEMS INC's return on equity exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 11.4% when compared to the same quarter one year prior, going from $2,187.00 million to $2,437.00 million.
- You can view the full analysis from the report here: CSCO Ratings Report