The Best 3 Stocks in the Dow Right Now: PFE, PG, IBM

Investing minds no less sharp than Ken Fisher have encouraged investors to look at larger cap stocks as those that are most likely to outperform over the next several months. "Mega caps" is the way that Fisher has referred to these stocks that he - and others - believes will be best positioned to both take advantage of and steer clear from many of the challenges that face stocks in 2008.

Whether or not you accept Fisher's hypothesis about the bigger being better this time around, there is always a measure of safety that investors can count on when turning toward the larger names. What is even better is that active investors can use our Long Term PowerRatings to find out which among those larger cap stocks are the ones that are most likely to outperform the average stock - mega cap thesis or no mega cap thesis.

All three stocks in today's report make their homes in the Dow industrials. As such, all three are large-cap, heavily traded and very liquid stocks that do business that is relatively easy to understand and follow in the mainstream news. Additionally, all three stocks have Long Term PowerRatings of 9, which makes them both significantly more reliable and better performers than the average stock, according to our research.

Let's look at the stocks.

Pfizer (PFE@PFE | Quote | Chart | News | PowerRating) Long Term PowerRating 9. Industry PowerRating 10

Pfizer is a stock we have featured frequently in recent weeks. The stock, in addition to having a Long Term PowerRating of 9, comes from an industry - Major Drug Manufacturers - with a PowerRating of 10.

We found that industry groups with PowerRatings of 10 - our highest rating - have dramatically outperformed the average industry group in our historical testing. Specifically, we found that 10-rated industry groups produced average annualized returns of more than 35% between 1995 and 2007. By contrast, the average industry group achieved average annualized returns of approximately 14.61% over the same time period.

Procter & Gamble (PG@PG | Quote | Chart | News | PowerRating) Long Term PowerRating 9. Industry PowerRating 8

Another stock that we have mentioned from time to time in 2008 is Procter & Gamble, one of the leading stocks in the Personal Products industry.

The Personal Products industry has a PowerRating of 8 - not as high as Major Drug Manufacturers, but still high enough for the sort of outperformance investors can expect from high PowerRating industries. With its Industry PowerRating of 8, the Personal Products industry group is likely to reach average annualized returns of 20.26% - still significantly better than that of the average industry group as shown above.

International Business Machines (IBM@IBM | Quote | Chart | News | PowerRating) Long Term PowerRating 9. Industry PowerRating 7

Last but not least is International Business Machines - IBM. We have not written about IBM nearly as often as we have stocks like Pfizer and Procter & Gamble, so the fact that IBM makes this list may in and of itself be significant.

IBM is part of the Diversified Computer Systems industry group, an industry group with a PowerRating of 7. Again, this is not as good as a rating of 10 like we saw with Major Drug Manufacturers, or even as good as a rating of 8 like we saw with Personal Products. But compared to the average industry, the average annualized returns of 18.02% produced by 7-rated industries is certainly a factor that can be used to separate potentially good investment opportunities from those that may be truly great.

Looking for more long-term solutions to your investing problems? Don't let the volatility of this market lead you to miss out on stocks you'll be glad to have bought a year from now.

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David Penn is Senior Editor of PowerRatings.net.