"Johnson & Johnson (NYSE: JNJ) has vast holdings, but its strategy is simple: Support a deep pipeline of new drugs and medical devices with an aggressive acquisition strategy and cost controls," notes blue chip investor Richard Moroney.

In his Dow Theory Forecasts, he adds, "And despite the recession, J&J has kept its financial footing, remaining one of the few companies with the top credit rating of AAA." Here's his long term outlook.

"This year the U.S. pharmaceutical market is expected to contract for the first time in 50 years as fewer people visit doctors or start new therapies for chronic conditions.

"Beyond 2009, an economic recovery should reinvigorate J&J, though it is too early to determine whether health-care reform will help or harm the company.

Stocks are up this year but not everyone is profiting. One reason is that many investors, stung by the market collapse, have been looking for safety by investing in dividend paying stocks. But Richard Moroney, editor of Dow Theory Forecasts, says that investing for yield is a flawed strategy.

Moroney, a chartered financial analyst, points out that while the S&P 1500 Index is up about 16% so far this year, investors in high-yielding stocks (with yields of 4% or more) have a year-to-date return of just 4%. And he says that stocks that do not pay dividends are up an average of 29%.

We spoke with Richard Moroney to find out why this is the case -- and what income investors should do.

I'd like to make a comment on the "Dow Theory" today: Since there were several write-ups circulating Tuesday about a new "bear-market signal" given by the theory on Monday, it is worth addressing.

Some analysts were all atwitter, saying that Monday's close on the Dow Jones Industrial Average and the Dow Transports broke under the January lows. Thus, they said, a new Dow sell signal was triggered.

The theory states that if a double confirmation occurs, (i.e., that if two of the three Dow averages make a new high or low) then a trend is confirmed.

Well, the Transportation Average did fall below both its January and November intra-day low and closing low. (I mention January only because one report said that it is relevant -- but it actually has no significance at all.) And the Industrial Average did break the closing low of January -- but that is irrelevant, since the market's lows were made in November.

"Investors should keep a defensive posture," says Richard Moroney. However, the editor of the blue chip advisory service, Dow Theory Forecasts, see opportunity in two drug stocks that he has just added to his buy list.

"In general, we prefer to let the market's action signal that the point of maximum pessimism has passed before deploying our cash reserves. But we intend to remain engaged, looking for stocks capable of bucking the bearish trend.

"Biogen Idec (NASDAQ: BIIB) produces biotechnology drugs that treat non-Hodgkin's lymphoma and multiple sclerosis. Per-share profits jumped 69% and operating cash flow surged 71% in the September quarter.

"Wall Street expects per-share-profit growth of 9% in 2009 and 7% in 2010, but good news on Biogen's most-promising drug could render those targets conservative.

"At 12 times estimated 2009 earnings, Biogen shares are the cheapest of the six largest U.S. biotech stocks. Biogen is being initiated as a Focus List Buy and a Long-Term Buy.

"AstraZeneca (NYSE: AZN) is being added to the Buy List. The British drugmaker offers an intriguing blend of value and growth potential. A study released this month showed that the company's cholesterol drug Crestor reduced the risk of various heart problems by 44%.

"The study could potentially expand Crestor's addressable market to include millions of new patients, though AstraZeneca is soft-pedaling the potential benefits. AstraZeneca, which earns a Quadrix Overall score of 94 and yields 4.5%, is being added to the Buy List."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.

"For more than a decade, International Business Machines (NYSE: IBM) lived up to its reputation as a slow-growing, stodgy company," says Richard Moroney.

The editor of the blue chip advisory, Dow Theory Forecasts, contends, "But over the last 12 months, the picture changed. Strong operating momentum is now propelling genuine operational growth despite U.S. economic weakness."

"Acquisitions and cost cuts have accounted for most of IBM's growth in recent years. In the 10 years ended 2006, sales increased at an annualized rate of less than 2%, and the company lost both market share and in?uence.

"However, sales growth has accelerated in each of the last three quarters, and per-share pro?ts have risen at least 23% in each period. Consensus estimates, trending upward over the last month, project per-share-pro?t growth of 24% in 2008 and 11% in 2009.

"A broad business mix has helped the company keep growing during the economic slowdown. IBM may still be best known for its hardware, but the company's strength over the last year has stemmed from the services and software businesses, which tend to be less economically sensitive than hardware.

"Hardware accounted for about 18% of sales in the six months ended June, while services represented 58% and software generated 20%. Financing operations brought in most of the last 4%.

"While the current economic climate has pinched the consumer, companies are still investing heavily in new technology. IBM's products and services help customers improve ef?ciency, productivity, and security, which in turn can reduce costs. In the six months ended June, IBM's revenue rose 12%, while per share-pro?ts jumped 34%. Revenue from services increased 17% in the six-month period.

"Partial insulation from the economic slowdown, coupled with new military-aircraft programs, give Lockheed Martin (NYSE: LMT) attractive capital-gains potential over the next several years," says Richard Moroney.

In his blue chip oriented Dow Theory Forecasts, the advisor explains, "A diversified business mix provides investors a measure of safety in a dif?cult economic climate. The stock is a Focus List Buy."

"Lockheed seems well-positioned with regards to the U.S. defense budget, with very little exposure to Iraq. The company is capable of growing pro? ts even if the new U.S. president pulls troops out of the country.

"While defense-spending growth is likely to slow in coming years, ongoing security threats and the need to replace aging equipment should keep the baseline defense budget, which excludes war-related costs, growing through at least 2012.

"A diversified business mix provides investors a measure of safety in a dif?cult economic climate. After the Air Force, Lockheed's next-largest end market is civil government and homeland security, accounting for 26% of revenue.

"The U.S. Navy accounts for 20% of sales and the Army 10%. About 13% of sales are international, and the U.S. communications industry accounts for 3%.

"For investors who seek superior relative performance but are unwilling to sacrifice dependability, the we offer four funds that consistently outperform their peers," says Richard Moroney.

In the mid-year forecast for his Dow Theory Forecasts, he explains, "All of these funds have outpaced category averages in each of last five years, and sometimes much longer." Here, he looks at those funds that he considers "perennial winners."

"To be sure, past returns do not guarantee future success. But, while the evidence is not conclusive, academic studies generally indicate performance tends to persist, particularly at the extremes. That is, the best funds continue to outperform their peers, while the worst funds keep lagging.

"Fidelity Export & Multinational (FEXPX), our favorite pick among large-company growth funds, is riding an impressive nine-year winning streak - the longest in its category. Among the more than 1,800 large-cap growth funds, less than 80, or roughly 4%, have outperformed the peer-group average for five straight years.

In its mid-year forecast, Dow Theory Forecasts -- which has been published for 5 decades -- features its top current picks, including IBM (NYSE: IBM), which earns its top designation as a "Focus List Buy."

Editor Richard Moroney explains, "IBM has repeatedly forecast its goal of per-share earnings of $10 to $11 in 2010. The company is well on its way to achieving that goal. Software, in particular, is key to IBM's earnings target.

"The company completed its acquisition of Telelogic in April, three months after purchasing Cognos. IBM expects acquisitions to contribute 3% of its goal of 7% to 10% growth in software sales.

"From 2002 to 2007, mainframe sales averaged 6% growth, but sales fell in three of those years, including 2007. The March quarter showed no improvement, as sales in the division fell 7%. But, with energy prices up, IBM sees an opportunity with its new, energy-efficient Z-series mainframe.

"Server sales have been spotty, but IBM's sales force translates server revenue into two to three times as much in software and systems revenue. IBM, with the potential to reach $155 to $165 over the next 12 months, is a Focus List Buy and a Long-Term Buy."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.

"Shares of Walgreen (NYSE: WAG) have come under pressure in recent months, reflecting a slowdown in sales because of a weakening economy and intensifying competition," notes Richard Moroney.

The editor of Dow Theory Forecasts adds, "However, Walgreen's long-term prospects remain appealing, and the stock is attractively valued. Walgreen is a Long-Term Buy." Here is his review.

"Big, strong, and healthy, Walgreen is the largest U.S. drugstore chain as measured by revenue and the second-largest based on store count.

"The company operates more than 6,200 stores in 48 states and Puerto Rico and plans to boost the count to 7,000 by fiscal 2010 ending August. Walgreen sees long-term potential for about 13,000 U.S. stores. Prescriptions generate about 65% of total sales, with the rest coming from general merchandise.

"In fiscal 2007, both pharmacy and general merchandise sales growth outpaced the industry average, and Walgreen increased market share in nearly all of its core categories.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Lockheed Martin (NYSE: LMT), the world's largest military weapons manufacturer, is the favorite conservative stock of Rich Moroney, editor of Dow Theory Forecasts. The advisor notes,"Lockheed generates about 80% of sales to the U.S. government. Lockheed is the prime contractor for the F-35 Joint Strike Fighter, a large and well-funded defense program -- and one of the company's most significant development projects.

"Lockheed has been working to diversify its defense and intelligence work, as well as non-defense government work. Its information-systems and technology-services businesses have been growing nicely, as the government is increasingly outsourcing.

"In August, Lockheed was chosen as the prime contractor for NASA's successor to the space shuttle -- an award with an initial contract value of $4.2 billion.

"At 16 times estimated year-ahead earnings of $5.55 per share, the stock trades at a discount to its five-year average forward P/E of 17 and its peer-group average of 21. Lockheed is a Focus List Buy and a Long-Term Buy."

To see Rich's favorite speculative idea for 2007, click here.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Philadelphia Consolidated Hldg (NASDAQ: PHLY) is the top speculative idea from Rich Moroney, editor of the small-cap oriented service, Upside.

The advisor says, "PHLY markets and underwrites property-and-casualty insurance, focusing on underserved markets. Product launches and service enhancements should help sustain premium growth and decent pricing.

"The company boasts a long history of selective and highly disciplined underwriting. The company consistently has one of the lowest loss ratios in the industry -- along with exceptionally high renewal rates. At 26%, the company's return on equity is well above the 15% of the average property and casualty insurer.

"September-quarter earnings per share surged 172% to $1.28, exceeding the consensus estimate by $0.55. Sales increased 19%. Total net earned premiums climbed 21%. Results benefited from the release of reserves due to favorable prior years' claims experience.