The 6 Best Stocks to Own in the Dow Jones Industrial Average for 2016

With a volatile 2015 wrapping up in just a few weeks, investors are eagerly looking ahead to the New Year, and adjusting their portfolios accordingly.

Which are the best stocks to buy? Everyone has their preferred strategies, whether its income investing, growth investingor in alternative strategies, but the below blue-chip stocks are strong contenders when it comes to bests of the best.

Now 119 years old, the Dow Jones Industrial Average is the second oldest stock market index and the companies in this 30-stock index make up some of the largest and influential companies in the U.S. In March, Apple made big news when it was added to the Dow, representing a new era of influential technology companies, replacing old-school telecom AT&T.

Here are the six top-rated stocks in the DJIA. 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 Goldman Sachs' 35 stocks for 2016.

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 equity 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 Nov. 27 closing prices.

 CSCO data by YCharts 

6. Cisco Systems Inc. (CSCO - Get Report) Industry: Technology/Communications Equipment
Market Cap: $138 billion
Rating: Buy, A
Year-to-date return: -1.8%

TheStreet Said: TheStreet Ratings team rates CISCO SYSTEMS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

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, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and reasonable valuation levels. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• CSCO's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 3.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
• CISCO SYSTEMS INC has improved earnings per share by 37.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, CISCO SYSTEMS INC increased its bottom line by earning $1.73 versus $1.49 in the prior year. This year, the market expects an improvement in earnings ($2.28 versus $1.73).
• 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 33.0% when compared to the same quarter one year prior, rising from $1,828.00 million to $2,431.00 million.
• 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.
• You can view the full analysis from the report here: CSCO

 INTC data by YCharts 

5. Intel Corp. (INTC - Get Report) Industry: Technology/Semiconductors
Market Cap: $138 billion
Rating: Buy, A
Year-to-date return: -5%

TheStreet Said: TheStreet Ratings team rates INTEL CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate INTEL CORP (INTC) 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 largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, INTC has a quick ratio of 1.66, which demonstrates the ability of the company to cover short-term liquidity needs.
• 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 Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, INTEL CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
• Net operating cash flow has remained constant at $5,735.00 million with no significant change when compared to the same quarter last year. In addition, INTEL CORP has modestly surpassed the industry average cash flow growth rate of -6.86%.
• The gross profit margin for INTEL CORP is currently very high, coming in at 78.24%. Regardless of INTC's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 21.49% trails the industry average.
• You can view the full analysis from the report here: INTC

 MSFT data by YCharts 

4. Microsoft Corp. (MSFT - Get Report) Industry: Technology/Systems Software
Market Cap: $428 billion
Rating: Buy, A
Year-to-date return: 16.1%

TheStreet Said: TheStreet Ratings team rates MICROSOFT CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate MICROSOFT CORP (MSFT) 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 solid stock price performance, increase in net income, reasonable valuation levels, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income increased by 1.8% when compared to the same quarter one year prior, going from $4,540.00 million to $4,620.00 million.
• The gross profit margin for MICROSOFT CORP is currently very high, coming in at 71.80%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.67% is above that of the industry average.
• Net operating cash flow has slightly increased to $8,594.00 million or 2.87% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.93%.
• You can view the full analysis from the report here: MSFT

 TRV data by YCharts 

3. Travelers Cos. Inc. (TRV - Get Report) Industry: Financial Services/Property & Casualty Insurance
Market Cap: $35 billion
Rating: Buy, A
Year-to-date return: 8.5%

TheStreet Said: TheStreet Ratings team rates TRAVELERS COS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

We rate TRAVELERS COS INC (TRV) 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 solid stock price performance, increase in net income, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. 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:

• 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 net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Insurance industry average. The net income increased by 1.0% when compared to the same quarter one year prior, going from $919.00 million to $928.00 million.
• Although TRV's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average.
• 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 Insurance industry and the overall market, TRAVELERS COS INC's return on equity exceeds that of both the industry average and the S&P 500.
• 35.69% is the gross profit margin for TRAVELERS COS INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 13.65% is above that of the industry average.
• You can view the full analysis from the report here: TRV

 DIS data by YCharts 

2. The Walt Disney Co. (DIS - Get Report) Industry: Consumer Goods & Services/Movies & Entertainment
Market Cap: $190 billion
Rating: Buy, A+
Year-to-date return: 22.2%

TheStreet Said: TheStreet Ratings team rates DISNEY (WALT) CO as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate DISNEY (WALT) CO (DIS) 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, growth in earnings per share, increase in net income and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• DIS's revenue growth has slightly outpaced the industry average of 7.4%. Since the same quarter one year prior, revenues slightly increased by 9.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
• Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 29.48% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DIS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
• DISNEY (WALT) CO has improved earnings per share by 10.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DISNEY (WALT) CO increased its bottom line by earning $4.90 versus $4.25 in the prior year. This year, the market expects an improvement in earnings ($5.66 versus $4.90).
• The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 7.3% when compared to the same quarter one year prior, going from $1,499.00 million to $1,609.00 million.
• 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. In comparison to the other companies in the Media industry and the overall market, DISNEY (WALT) CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
• You can view the full analysis from the report here: DIS

 HD data by YCharts 

1. Home Depot Inc. (HD) Industry: Consumer Goods & Services/Home Improvement Retail
Market Cap: $170 billion
Rating: Buy, A+
Year-to-date return: 31.2%

TheStreet Said: TheStreet Ratings team rates HOME DEPOT INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate HOME DEPOT INC (HD) 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, notable return on equity, good cash flow from operations, solid stock price performance and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• HD's revenue growth has slightly outpaced the industry average of 4.5%. Since the same quarter one year prior, revenues slightly increased by 6.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
• Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 38.80% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
• HOME DEPOT INC has improved earnings per share by 17.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HOME DEPOT INC increased its bottom line by earning $4.72 versus $3.75 in the prior year. This year, the market expects an improvement in earnings ($5.35 versus $4.72).
• The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 12.2% when compared to the same quarter one year prior, going from $1,537.00 million to $1,725.00 million.
• The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, HOME DEPOT INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
• You can view the full analysis from the report here: HD

Source: http://www.thestreet.com/story/13381098/1/the-6-best-stocks-to-own-in-the-dow-jones-industrial-average-for-2016.html?kval=dontmiss