(MONEY Magazine) – LONG-TERM INVESTORS can't afford to ignore the 30 multibillion-dollar companies in the Dow Jones industrial average. In addition to accounting for almost one of every four dollars invested in stocks, the 30 include some of the world's strongest companies -- firms with popular products, leading shares of growing international markets and the financial clout to demolish competitors. Investors have made phenomenal profits from several Dow stocks in recent years. During the 10 years through 1992, for example, Walt Disney shares soared 988%, while Coca-Cola rose 867%. And then there's IBM. The company's shares climbed 425% in seven years after it joined the Dow in 1979 -- and then plunged 65% from a 1987 peak to $52.50 recently. ''Size alone is no guarantee of success -- or even survival,'' notes Hugh Johnson, president of the brokerage First Albany in Albany, N.Y. ''The biggest firms often have the hardest time adapting to new conditions.'' The question for investors therefore is this: Which Dow stocks belong in your portfolio, and which ones don't? On page 157, you'll find the answers in MONEY's ranking of all 30 Dow stocks. Each rating, based on a numerical score devised by Standard & Poor's in New York City, reflects the opinions of virtually every major brokerage analyst who covers the stock. The scores range from 1.18 for top-rated McDonald's, a strong buy, to 0.07 for last-place Westinghouse. (The scoring system is explained in the text that accompanies the table.) Our study identified only eight Dow stocks as outright buys, with average scores of 1 or higher. Somewhat surprisingly, Philip Morris seems attractive too, despite its widely publicized problems in the domestic cigarette business. As for the others, you might hold on to shares you already own that get scores of 0.75 to 0.99, but consider selling stocks with scores of 0 to 0.74. No stock was rated an outright sell (a score below 0). Wall Street analysts are notoriously reluctant to issue such recommendations for fear of antagonizing the company managers on whom they depend for information. Our eight buys either have strong positions in growing industries or are taking aggressive steps to offset deteriorating core businesses. For example, McDonald's is expanding its chain of overseas restaurants to offset slower domestic growth. Analysts' least favorite stocks include companies that are losing ground in their core businesses and haven't yet found a way to turn themselves around. For example, American Express, No. 20, has seen its share of the credit-card market shrink from 24% to less than 20% since 1989; most analysts aren't convinced that new CEO Harvey Golub can remedy that. Sears, No. 26, has slipped from the No. 1 retailer to No. 3, behind discounters Wal-Mart and K Mart. In addition, analysts dislike firms that derive most of their profits from low-growth industries. IBM, No. 28, gets 70% of its earnings from mainframe computers, a business that may not grow more than 3% annually over the next five years. And dead-last Westinghouse has posted $2.1 billion in losses since 1990, largely because of bad investments in real estate; the company sold most of the properties in early April. Here's a detailed look at the eight recommended stocks, all traded on the New York Stock Exchange and discussed in order of their rankings: McDonald's (ticker symbol: MCD; recently traded at $52.50 a share). McDonald's CEO Michael Quinlan, 48, is relying on international markets to offset slow growth at his company's 9,000 U.S. restaurants. Last year, he opened 400 new overseas outlets, and he'll start up another 450 or so this year, chiefly in Europe. All told, McDonald's now gets 44% of its $7.1 billion sales from abroad.

''As investors recognize that McDonald's is becoming less dependent on the domestic market, they'll focus on the potential for fast earnings growth in Europe and elsewhere,'' says analyst Allan Hickok of Piper Jaffrey in Minneapolis. He thinks foreign profits will continue to rise at least 20% annually through 1997. Meanwhile, to boost U.S. sales, which were up 5% last year -- the biggest revenue gain since 1989 -- Turner has jazzed up the company's menus, offering a broader range of dinner entrees. Portfolio manager Helen Hayes at the Janus Funds in Denver figures domestic profits will rise 6% this year. Hickok forecasts that McDonald's overall annual earnings will increase 13% to 14% for at least the next five years. Hayes predicts that the shares, which currently yield 0.8%, will rise 14% or so to $60 within 18 months for a 15% total return. AT&T (T, $56.50). ''This company is not a stodgy utility anymore,'' says Kent Simons, manager of the Neuberger & Berman Fund in New York City. ''It's becoming a bona fide growth company.'' CEO Robert Allen, 57, sparked the transformation of $64.9 billion AT&T with such strategically smart moves as his recent agreement to buy about 33% of McCaw Cellular, the dominant company in the fast-growing cellular-telephone business, for $3.8 billion. Similarly, he acquired computer manufacturer NCR in 1990 for $8 billion as an outlet for new products developed at AT&T's 25,000-employee Bell Labs. Analysts look for AT&T's profits to grow 13% or more a year through 1997. % Simons says the shares, which yield 2.3%, could rise 20% within 18 months for a 24% total return. Allied Signal (ALD, $65.25). From 1981 to '91, earnings at $12 billion Allied Signal declined 50%. Then Lawrence Bossidy, now 58, took over as chairman. He cut capital spending by $225 million, slashed the dividend from $1.80 to $1 a share, sold eight small divisions and eliminated 6,200 jobs. Such moves will soon show up in profits, which also are benefiting from successful products such as auto air bags; sales of them will double to about $180 million this year. As a result, earnings from Allied's three major businesses -- aerospace (sales: $5.2 billion), automotive parts ($4.5 billion) and engineered materials such as fiber and plastics ($2 billion) -- rose 34% last year. Cash flow hit $255 million. ''This is the first time in seven years that Allied has had strong cash flow to finance future growth,'' says analyst Laurance Baker of Legg Mason in Baltimore. Analysts expect cost reductions and rising sales to boost Allied's earnings 22% this year and 17% in 1994. Baker thinks the shares, which yield 1.6%, could rise at least 15% to $75 within 18 months for an 18% total return. Du Pont (DD, $48.50). Hit hard by the recession -- profits slumped 40% in 1991 and stayed flat last year -- this $37.8 billion company is bouncing back. CEO Edgar Woolard, 59, is a third of the way into a six-year campaign to cut annual costs by 10%, or $3 billion. He also has reduced the 133,000-person work force by 8% and is modernizing the company's roughly 900 plants, which produce chemicals, fibers and plastics. To wring money out of a weak division, Woolard has shifted the company's pharmaceuticals business into a promising joint venture with drug powerhouse Merck, which has a stronger sales force. Revenues at the venture grew 33% in 1992, to $795 million, vs. $597 million a year earlier. ''By late this year, Du Pont's profits will begin to reflect Woolard's efforts,'' says analyst Christopher Willis of Wertheim Schroder. Analysts expect the firm's earnings to grow 20% in 1993. Willis says the stock, which yields 3.6%, could rise 22% within 18 months for a 28% total return. Caterpillar (CAT, $58.25). CEO Donald Fites, 59, is determined to maintain $10.2 billion Cat's strong market share in each of its 13 businesses, ranging from tractors to turbines. Next year he will complete a seven-year, $2 billion plant-modernization program. In addition, Fites introduced 48 new or improved models of engines and machines in 1992, including a low-emission gas turbine engine and a family of hydraulic excavators. Such innovations have increased the firm's potential worldwide market 25% since 1986, estimates analyst Steven Colbert of Prudential Securities. As the world's largest manufacturer of construction equipment, Cat also is expected to profit from increased federal spending on roads, bridges and mass transit systems, which Colbert estimates will rise 50% or more in 1993 to nearly $30 billion. Analysts figure that Cat will earn $2 a share this year and $4.18 in 1994. Colbert sees a 20% gain in the stock, which yields 1%, within 18 months, for a 22% total return. General Electric (GE, $89). Chairman Jack Welch, 57, has sold off $11 billion worth of GE's less promising businesses over the past decade and spent $19 billion to buy new ones. His dealmaking has left the $62.2 billion company with 13 divisions that are all first or second in their industries. Analysts speculate that Welch will use the firm's strong financial position -- debt amounts to only 14% of total capital -- to finance another major acquisition within the next two years. Possible targets, analysts say, include firms in commercial aerospace and financial services. Meanwhile, this year's economic recovery will boost profits at such cyclical GE divisions as appliances and electric motors. Analysts expect the company's earnings to rise 13% this year and 11% in 1994. Analyst Nicholas Heymann at NatWest Securities in New York City figures that the shares, which currently yield 2.7%, could rise 9% to $97 within the next 18 months for a 13% total return. Eastman Kodak (EK, $52.50). ''Over the past decade, Kodak has thrown billions of dollars away in excess overhead, bad acquisitions and misguided research,'' says First Albany analyst James Joyce in New York City. But $20.6 billion Kodak still commands half the world's market for conventional photographic film and paper. Moreover, Joyce and other analysts fully expect that chairman Kay Whitmore, 60, will succeed in turning Kodak around. In January, Whitmore began laying off 2,000 employees -- 3% of the firm's U.S. work force. He also has chopped 10%, or $100 million, from overambitious research-and-development spending, including research on digital cameras. Another good move: In January, Whitmore hired a new chief financial officer, Christopher Steffen, 51, a veteran of turnarounds at Chrysler and Honeywell and a proven cost cutter. The pros speculate that Whitmore's next decision will be to sell Kodak's slow-growth $4 billion chemical operation and its money-losing $2.5 billion copier division. Analysts forecast earnings gains of 28% in 1993 and 13% in 1994. Such increases could boost the shares, which yield 3.8%, 30% within 18 months for a 36% total return. Merck (MRK, $34). Since doubling in price in 1991, Merck shares have lost 32% of their value on investors' fears that the Clinton Administration will restrict drug price increases. But analyst Larry Smith of Hambrecht & Quist in New York City sees the decline as an opportunity. ''Merck's earnings probably will grow around 15% annually over the next few years, twice as fast as profits at a typical S&P 500 firm, but its shares carry a moderate P/E of 16.7,'' he says. That compares with a 15.8 P/E for the average stock in the S& P 500. Smith and other analysts also note that $9.7 billion Merck has voluntarily limited its price hikes since 1990 and has still made oceans of money -- $2.8 billion, or $2.45 a share, in 1992, up 14% from '91. Moreover, although CEO Peter Vagelos, 64, has proposed to limit future price increases on each of the company's drugs to one percentage point above the inflation rate, Merck can still reap sizable profits by introducing new drugs. Since July 1992, in fact, the company has submitted six products to the Food and Drug Administration, including potential blockbuster treatments for schizophrenia, glaucoma and osteoporosis, that together could generate $2.5 billion in annual revenues by 1998. Analysts predict that Merck's earnings will rise 15% this year and 14% in 1994. Analyst Sharon Dorsey Wagoner of Argus Research in New York City thinks the stock, which yields 2.9%, could fall another 5% or so when the Clinton plan is unveiled but could then rebound about 20% by fall of 1994, for a 24% total return. A ninth stock, $49 billion Philip Morris, is also worth considering. The company couldn't be assigned a score because, as MONEY went to press, analysts were still reeling from CEO Michael Miles' stunning April 2 announcement that the company would slash the price of its best-selling Marlboro by as much as 40 cents a pack to compete with increasingly popular cut-rate cigarettes. The news sank the stock price 23% to $49. Nonetheless, many analysts regard Philip Morris at current prices as an excellent choice for long-term investors. Although the analysts expect the * company's domestic tobacco profits to drop 40% this year, they say the losses could be partially offset as the company boosts sales of its premium cigarettes. In one of the company's market research studies, a 40 cents price cut increased Marlboro's market share by four percentage points. ''The company still has excellent growth potential,'' says money manager Thomas Russo of Lancaster, Pa. Analyst Douglas Nathman of David L. Babson & Co. in Boston adds that overseas tobacco profits, fueled by new markets in the ex-Communist bloc and the Far East, could climb 20% to $2.4 billion this year. In addition, earnings at Philip Morris' $28 billion Kraft General Foods division, which boasts such well-known brands as Miller beer and Oscar Meyer cold cuts, could increase 7%. Analysts forecast that the company's overall earnings will decline 8% to around $5 a share this year but then will climb 15% annually through 1996. Nathman figures the shares, which currently yield 5%, could rise 55% to $76 within 18 months, for a 63% total return.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: RANKING THE 30 DOW STOCKS McDonald's ranks No. 1 among the 30 companies in the Dow Jones industrial average, according to Standard & Poor's calculation of analysts' opinions of the Dow stocks. S&P reviews the buy, hold and sell recommendations of analysts at more than 150 brokerages and research firms and reduces their judgments to a numerical rating. Stocks that average 1 or higher (green) are considered buys. Scores between 0.75 and 0.99 (yellow) are the equivalent of a buy/hold rating, while those between 0 and 0.74 (gray) approximate a hold rating. None of the stocks got a minus number signifying a sell. The past and projected earnings growth shown here reflects estimates by the Value Line Investment Survey.