11 of 20 large stocks look like buys now

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Almost every year, I put "buy, neutral or avoid" ratings on the 20 largest stocks.

Today's ratings are my eighth try. One-year total returns from the previous seven outings were 11.6 percent on the buys, 8.2 percent on the neutrals, and 6.1 percent on the stocks I said to avoid.

Bear in mind that recommendations are hypothetical and don't involve trading costs or taxes. Past performance is no guarantee of future results. And results of my column recommendations should never be confused with the performance of real-money portfolios that I manage.

The lineup of the biggest stocks is ever-changing. For example, Apple Inc., not even in the top 20 five years ago, now has the largest market value.

• Apple Inc. (AAPL, $371 billion market value), sell. The historical record shows underperformance by stocks in the year and five years after they become the largest. And Apple's charismatic leader, Steve Jobs, has stepped down as CEO due to health problems.

• Exxon Mobil Corp. (XOM, $362 billion), buy. Exxon has risen about 134 percent in the past ten years, more than triple the gain in the S&P 500. This highly profitable company now sells for less than 10 times earnings.

• Microsoft Corp. (MSFT, $227 billion), buy. At $27, Microsoft stock is $20 below its 1999 high. It is highly profitable, with a 45 percent return on equity last fiscal year. It sells for 10 times earnings, a bargain.

• International Business Machines Corp. (IBM, $206 billion), sell. At nearly nine times book value, the stock looks pricey to me. And IBM's debt exceeds its equity.

• Chevron Corp. ($CVX, $200 billion), buy. If analysts are right, Chevron's profits will set a record this year. The stock sells for only nine times earnings, and the company has a sterling balance sheet.

• Wal-Mart Stores Inc. (WMT, $181 billion), neutral. Earnings will be up only a penny this fiscal year, analysts predict. Yet this haven of penny-pinching shoppers might do well if the economy sinks into another recession.

• Berkshire Hathaway Inc. (BRK/B, $177 billion), buy. Warren Buffett, the genius CEO, is 81 and can't go on forever. But he has stamped the company with a brand of excellence. The stock sells for only 1.1 times book value.

• Johnson & Johnson (JNJ, $177 billion), buy. Growth is tepid, but the nation's largest health care company by market value is very profitable, with a 24 percent return on equity last year.

• Procter & Gamble Co. (PM, $177 billion), neutral. Investors tend to overpay for steady earnings, and I think that's the case here.

• Google Inc. (GOOG, $176 billion), sell. Google's a great company, but at five times revenue, it's a very expensive stock.

• General Electric Co. (GE, $173 billion), sell. None of the company's major divisions seem to have much traction. Jeffrey Immelt doesn't seem to be quite the CEO that Jack Welch was, and he faces a tougher environment.

• AT&T Inc. (T, $172 billion), buy. In a choppy, sloppy market, the 6 percent dividend yield is very appealing.

• Coca-Cola Co. (KO, $164 billion), sell. At 19 times earnings and more than four times book value, the soft-drink monarch's stock seems too pricey.

• Oracle Corp. (ORCL, $148 billion), buy. At 17 times earnings, this stock is suitable for growth investors. Five-year earnings growth here is at a 17 percent annual pace.

• Pfizer Inc. (PFE, $142 billion), buy. This is a cheap stock, fetching a mere eight times earnings and yielding more than 4 percent in dividends.

• Wells Fargo & Co. (WFC, $132 billion), buy. It may be a while before the banking sector recovers, but with Wells shares just above book value, this seems a good home for patient money.

• JP Morgan Chase & Co. (JPM, $130 billion), buy. I like JP Morgan even more than Wells Fargo, partly because it is cheaper, selling for only 0.75 times book value. I think CEO Jamie Dimon is able and tough and has good judgment.

• Philip Morris International Inc. (PM, $121 billion), sell. This is the non-U.S. tobacco business spun off from Altria, which itself was formerly called Philip Morris. I don't like it because cigarette revenue is falling in Europe, its largest market.

• Intel Corp. (INTC, $121 billion), buy. Intel can boast steady dividend increases and leadership in the semiconductor market. It has very little debt, and the stock is at 10 times earnings.

• Amazon.com Inc. (AMZN, $109 billion), sell. CEO Jeff Bezos has been innovative and captured an increasing share of the online retailing market. Still, I consider 105 times earnings a ridiculous price to pay.