With the Dow Jones Industrial Average recently trading at its lowest level in years, many investors are starting to look for favorably priced Dow stocks as short-term and long-term investments.

One of the better metrics for measuring stocks is the price/earnings-to-growth ratio, which is the P/E ratio divided by the growth rate. The lower the ratio, the better the buy.

Stockpickr has reviewed all the stocks in the Dow and compiled a portfolio of the top 10 stocks with the lowest PEG ratios.

At the top of the list is Boeing (BA), the huge aircraft and aerospace company, which has a PEG ratio of 0.60. The company just announced that it is buying Federated Software Group, a St. Louis engineering services and software systems company, which provides services to the Department of Defense. Its Long Beach, Calif., location recently received an environmental certification. The stock has a P/E of 8 and a yield of 3.8%.

Boeing is favored by Leon Cooperman, founder of Omega Advisors, a $4.5 billion hedge fund based in New York City. Previously, he worked for Goldman Sachs for 25 years. Cooperman also likes Mirant (MIR), with a PEG of 0.49; WellPoint (WLP), with a 0.59 PEG; and Koninklijke Philips Electronics (PHG), with a 0.66 PEG.

Another Dow stock with a low PEG is Chevron (CVX), which has a PEG of 0.60. For the quarter ended June 30, its earnings were up 11.1% on a revenue increase of 49.8%. The stock has a P/E of 7 and a 4.3% yield.

Chevron is owned by T. Boone Pickens, the famous trader specializing in oil stocks. In 2005, he was the highest-paid hedge fund manager, earning $1.4 billion after a return of about 300% for his investors during the year. He also owns Halliburton (HAL), with a PEG of 0.40; XTO Energy (XTO), with a PEG of 0.59; and SandRidge Energy (SD), with a 0.75 PEG.

Caterpillar (CAT) also has a low PEG at 0.61. This construction equipment manufacturer just announced that its chairman and CEO, Jim Owens, was elected chairman of The Business Council. The stock has a P/E of 7 and a yield of 4%.

Caterpillar is owned by the Blackrock Equity Dividend Fund, which has a Morningstar rating of five stars and is managed by Robert Shearer. It has had an average annual return of 13.93% over the last five years. The fund also owns Wells Fargo (WFC), with a PEG of 1.98; Procter & Gamble (PG), with a PEG of 1.36; and Deere (DE), with a 0.72 PEG.

For more ideas, check out the Stockpickr portfolio of the top 10 Dow stocks with the lowest PEG ratios.

Posted on Oct. 20, 2008