(MONEY Magazine) – It took nearly a century for the Dow Jones industrial average to climb to the 1000 mark, another 15 years to get to 2000, but then only four more to hit 3000 in 1991. And if the pattern continues, the Dow would top 4000 in three years -- that is, during 1994. You math whizzes know that each 1000-point advance is a smaller percentage gain than the one before. Still, the market's quickening pace also reflects the growing momentum of the stock boom that began in 1982 -- and is still going strong. "The Dow could flirt with 4000 in the first half of the year," says Hugh A. Johnson, chief investment officer at First Albany in Albany, N.Y. Of course, all that's needed for that to happen is a less than thrilling gain of 5.7% from current levels. To do better, you will have to pick the most promising Dow stocks from among the 30. There are three basic ways to try to do that: Seek out cyclical stocks that will soar with the economy, look for bargain shares that offer big potential gains, or favor companies with superb business franchises. In this story, we spotlight six Dow stocks -- two cyclicals, two value choices and two companies with exceptional franchises. In addition, many experts recommend one or more of the Dow's oil stocks -- Chevron, Exxon and Texaco (for more on energy stocks, see Forecast on page 196). If picking individual issues is a bigger job than you want to take on, you can simply buy the Dow's 10 highest-yielding stocks each year, a strategy that frequently beats the overall average (see the box below). On the other hand, if you want to focus on particularly attractive companies, here's a look at six of them. They all trade on the New York Stock Exchange, of course, and - could return 19% or more over the next 18 months. Bethlehem Steel (ticker symbol: BS; recently traded at $20.25 a share; no yield). "Bethlehem Steel is probably the purest economic recovery play in the Dow," says Joseph J. McAlinden, chief investment officer at Dillon Read in New York City. Steel prices rose 3.5% last year and could move up another 3.5% in '94, according to analyst J. Clarence Morrison at Prudential Securities in New York City. One reason: booming auto sales. As a result, Bethlehem (estimated 1994 sales: $4.6 billion) posted its first quarterly profits in the second half of 1993 after 2h years of losses. Earnings also benefited as cost cutting finally paid off. Over the past five years Bethlehem has nearly halved the cost of making steel at its mammoth Sparrows Point, Md. facility, which accounts for more than a third of the company's production. Morrison sees earnings rebounding to $1.70 a share this year and hitting $3.25 in '95. He thinks the stock could reach $24 in 18 months, a 19% gain from here. Caterpillar (CAT; $91; 0.7%). The world's largest producer of earth-moving and construction machinery, $11.7 billion Cat is profiting immensely from the U.S. economic recovery. And though the company has yet to reach a final settlement with the United Auto Workers following recent labor strife, analysts are confident that Cat's earnings will continue to soar. Most of Caterpillar's current profit gains are in North America. But in the future, Cat figures to do even better overseas, where it gets half its sales." There's no other company better positioned to benefit from worldwide infrastructure investment," says analyst Charles S. Harris at Oppenheimer & Co. in New York City. Cat's earnings recovered to about $2.80 a share last year, from a $2.16 a share loss in '92. Analyst Steven J. Colbert at the San Francisco office of Prudential Securities sees profits reaching $5 this year and $8 in 1995. He thinks the stock could move up 22% to $110 within 18 months. Woolworth (Z; $25.75; 4.5%). With annual sales of $9.8 billion, Woolworth is one of the world's largest retailers. But since 1991, the company has proved that size isn't everything. "The company is in turmoil," says David A. Katz, chief investment officer at Matrix Asset Advisors in New York City. Woolworth's weaknesses include its prominent position in recession-riddled Germany and Canada, plus the decline of its five-and-ten-cent stores in suburban and rural areas of the U.S. But Katz expects a major turnaround over the next two years, as the German and Canadian economies recover. Furthermore, Woolworth has been steadily closing its uncompetitive five-and-tens, while expanding its highly successful specialty outlets -- such as Footlocker for athletic shoes and Northern Reflections for outdoor gear. Says Katz: "Once Woolworth gets its act together, the stock could trade in the low $30s." That would mean a total return of 35% or more over 18 months. Philip Morris (MO; $58; 4.5%). The maker of Marlboro cigarettes and other consumer products has seen its stock fall 36% since 1992 as investors have become convinced the tobacco business is doomed. Maybe so, concedes Donald Yacktman, president of Yacktman Asset Management in Chicago. But he notes that only the domestic tobacco business is going up in smoke, and it accounts for just a quarter of Philip Morris' earnings. "International tobacco profits may surpass domestic in '94," says Yacktman, "and that business is growing about 15% a year." The rest of Philip Morris' $62.1 billion sales comes from packaged foods, such as Kraft cheeses and Post cereals, and Miller beer. Says Yacktman: "If you add up all the pieces, the company is probably worth $100 a share." Analyst Ronald B. Morrow at Smith Barney Shearson expects earnings to grow to $5.30 this year and about $6 next year. He believes the stock could reach $75 within 18 months, for a total return of 36%. (For the record, I have owned Philip Morris for six months.) General Electric (GE; $103.50; 2.8%). "The best investing strategy now is to look for companies that can post double-digit earnings gains for the next five years," says A. Marshall Acuff, portfolio strategist at Smith Barney Shearson in New York City. Among such companies with superb franchises, $37.8 billion General Electric stands out because of its leading positions in aircraft engines, power systems, financial services and broadcasting (through NBC). An important part of GE's growth potential lies overseas, explains analyst Kent A. Newcomb at A.G. Edwards in St. Louis. Some 50% of the company's power generation equipment, for example, is sold outside the U.S., principally in Japan and Korea. Newcomb estimates that earnings will increase 12% to $6.75 a share this year and climb to $7.60 in '95. He expects the stock to reach $120 over 18 months. Acuff, who is a bit more optimistic, sees a $125 target price, which would represent a 31% total return. | Minnesota Mining & Manufacturing (MMM; $106; 3.1%). Richard C. Young of Young Research & Publishing in Newport, R.I. rates AT&T and 3M as his two favorite stocks (for more on AT&T, see the Wall Street Newsletter in the December issue of Money). With annual sales of $13.9 billion, 3M has strong franchises and an exceptionally diverse product line. "They offer untold varieties of tape alone," says Young. Other products include flooring, cleaners, photographic supplies and medical items -- not to mention those ubiquitous Post-Its. Analyst Eugene G. Glazer at Dean Witter Reynolds in New York City projects that 3M can boost its profits 10% to 12% annually, thanks largely to a strong flow of new products in all its businesses. "More than 30% of their sales come from products introduced in the past five years," says Glazer. He thinks 3M shares could rise to the low $130s in the next 18 months, for a 29% total return.