Still Some Value Plays Among The Dow 30

 |  Includes: AXP, C, JNJ, MMM, PG
by: Mike Edwards

Despite the Dow Jones Industrial Average's long climb to 14,000, Gene Marcial from Business Week reports that there are nine companies among the Dow whose shares are trading at a discount to their estimated worth. Among these blue chips that could be attractive to bargain hunters are companies like Johnson & Johnson, Wal-Mart, and Proctor & Gamble, according to Pat Dorsey, director of research at Morningstar.

Dorsey estimates that JNJ, for example is trading at a 22% discount to its fair value estimate. He says that JNJ hasn't been this cheap in 15 years. It's trading at just 15 times S&P's 2007 EPS estimate. The stock is trading around $61, but Dorsey thinks the stock is worth around $80. In a recent post, I suggested that JNJ could easily be selling for $70 to $75 based on historic valuations.

Proctor & Gamble is another bellweather trading at a discount. S&P's Loran Braverman has a $77 price target on the shares, that are currently trading for around $61. Dorsey also believes that P&G (NYSE:PG) is worth $77.

Some other discounted names include Home Depot (NYSE:HD), American Express (NYSE:AXP), 3M (NYSE:MMM) and Citigroup (NYSE:C). Georges Yares says that Citigroup is a strong player among the big banks because of its geographic diversity. He estimates the the company -- now trading close to $51 -- to be worth $65 with a dividend just north of 4%.

Warren Buffett suggests determining the value of a company, and then buy its shares at a fair or bargain price to your estimate. He suggests a discounted price, because your estimate of the price for the shares could be wrong. Giving yourself a margin for error allows your estimate to be a little off, while still being able to make a profit on your purchase.

Disclosure: I own shares in Johnson & Johnson.