This is going to be a journey ending with eight stock picks for 2008, on December 28, 2007. It is my intention to use the closing prices on that day for those eight stocks as the point of departure to publicly track the results and see if I can beat the market again. This year, as measured through October I have done so. I have also been tracking James Cramer's picks and he too has beaten the market to date, but lags behind me (sorry, couldn't resist). While we made some great picks, we both had some dogs as well. Furthermore, I will be the first one to admit that there is some luck involved in the short run.

Last year I beat the market, earning 29%, and it was my fifth straight year doing so after going down in flames with the rest of you when the tech bubble burst. At that time I also had the pleasure of being an Enron investor as well, so I have made plenty of blunders. But I have learned a lot from my mistakes, and hopefully others can learn from them as well as I share my investing adventures and how I turned things around.

More than a few optimistic reports have been written as the Dow Jones Industrial Average (DJIA) continues to climb to new highs. Given my value perspective and having run a few stock screens, some of the 30 stocks in the Dow have actually floated to the top. I will be reviewing the entire Dow in search of deep value and summarizing on my top three (10%) from a value perspective. The following is my view of the first five Dow stocks.

3M Company (NYSE: MMM) appears to be fairly valued from my perspective. I like the low debt ratio of 0.3 and higher than average yield of 2.19%. Given the price-to-book of 5.94 though, I think 3M will have to continue to expand its earnings overseas to interest me further. This is a quality stock, with good margins and good returns on equity, assets, and investment that are all higher than its lower than average P/E of 15. I view this stock as a good investment but not a great investment, and one that provides some downside protection.

Alcoa Aluminum (NYSE: AA) is on everyone's watch list, and for good reason. It reminds me of a line from the long-running TV show Married with Children, where Al Bundy shouts out to his wife Peg after a long day at the shoe store, "Either feed me, or feed me to something, I just want to be part of the food chain." There have been rumors galore that Alcoa might fall prey to a buyout from BHP Billiton Ltd ADR (NYSE: BHP) or another large player wanting to expand its North American presence. In the meantime, Alcoa has announced that it has an interest in acquiring Alcan Aluminum (NYSE: AL).

At 2.28, the price-to-book ratio of Alcoa is less than half that of 3M, and the price-to-sales is half too at 1.14. The debt levels are low and the price-to-cash-flow is low. Alcoa pays a lower than average (for the DJIA) yield of 1.75, but still respectable. For whatever reason, investors may be looking for soft pricing in aluminum related to concerns about a slowing world economy. While this may be a concern in the U.S., international growth does not seem to be slowing down. Alcoa is up about 35% from last year's lows, but only a couple of dollars from its highs of two years ago, so its path has been erratic. The low metrics, expanding international markets, and the high probability of consolidation in the market should create future pricing power. This does seem like a value play to me.