"We follow an approach to investng that focuses on broadly diversified investments in undervalued stocks for their long-term appreciation potential," says value investor John Buckingham.

The money manager and editor of The Prudent Speculator explains, " Two recently featured ideas -- Abbott Laboratories (ABT) and Baxter International (BAX) -- are among those we feel could serve as a portfolio foundation or as a new ideas for well- diversified holdings.

I first discussed Baxter International (BAX) here on March 13, 2009, at a price of $51.16, and share have since drifted below $50 after clearing that key, psychological resistance level. The calculation is to maintain the trade, but Baxter needs to show some improvement in the months ahead.

Baxter makes a variety of medical products across three divisions: drugs and vaccines, dialysis equipment, and IV supplies. The 2011 performance likely will be led by continued growth in IV therapies, global injectables and anesthesia products, and renal care (including revenue growth in its peritoneal dialysis product).

• Morgan Keegan upgraded Copano Energy (CPNO) to Outperform from Market Perform based on the $300M capital infusion it received from TPG Capital.
• Wells Fargo upgraded SunTrust (STI) to Market Perform from Underperform following the company's Q2 results citing improving credit quality trends and valuation.
• UBS upgraded Baidu (BIDU) to Buy from Neutral based on solid fundamentals following the strong Q2 report and guidance and valuation. The firm raised its price target to $92 from $69.
• Baxter (BAX) was upgraded to Conviction Buy from Neutral at Goldman.
• JetBlue (JBLU) was upgraded to Buy from Hold at Soleil.
• Penn Virginia GP (PVG) was upgraded to Outperform from Sector Perform at RBC Capital.

• Piper Jaffray downgraded Beckman Coulter (BEC) to Neutral from Overweight following the company's weaker than expected Q2 results and lowered guidance. The firm lowered its target for shares to $60 from $74. Shares were also downgraded to Hold from Buy at Jefferies and to Neutral from outperform at Baird following the company's reduced guidance.
• Keefe Bruyette cut AmeriCredit (ACF) to Market Perform from Outperform following the acquisition by General Motors (GM, MTLQQ).
• FBR Capital downgraded SunTrust (STI) to Market Perform from Outperform and lowered its price target to $27 from $34. The analyst believes larger banks are better positioned than regionals due to greater prospects of reserve releases.
• Travelers (TRV) was downgraded to Perform from Outperform at Oppenheimer.
• Lender Processing (LPS) was downgraded to Neutral from Buy at Goldman.
• Penn Virginia Resource (PVR) was downgraded to Sector Perform at RBC Capital.

• ThinkEquity assumed coverage of SanDisk (SNDK) with a Buy rating.
• Macquarie initiated Allergan (AGN) with an Outperform rating and $75 price target.
• Macquarie also initiated Cooper Companies (COO) with an Outperform rating and $45 price target.
• NCR Corp (NCR) was initiated with a Hold rating at KeyBanc.
• CryoLife (CRY) was started at Benchmark Co. with a Buy rating and $8 target.
• China New Borun (BORN) was initiated with an Overweight rating and $7.40 target at Piper Jaffray.

I first discussed Baxter International (BAX) here on March 13, 2009, at a price of $51.16. But shares have been treated rudely by the Street, after Baxter lowered 2010 earnings guidance to $3.92 to $4.00 from the previously released $4.20 to $4.28.

Moreover, Baxter's stock performance is a classic example concerning how even modest bad news can send a stock reeling: BAX fell from about $60 to $40. Even so, the calculation here is to stick with the position, but the sell/stop loss is close by at $37.

Analyst upgrades

• UBS upgraded CF Industries (CF) to neutral from sell. The firm cites valuation for the upgrade. In addition, UBS raised its price target on shares to $84 from $81.
• Baird upgraded Johnson Controls (JCI) to outperform from neutral and raised its price target to $42 from $33. The upgrade was based on improving margins, China growth, and upside from a cyclical recovery.
• Barrington upgraded G&K Services (GKSR) to outperform from market perform ahead of the company's Q3 results to reflect optimism regarding the company's operational turnaround. The firm set a $35 price target for shares.
• LaSalle Hotel (LHO) was upgraded to top pick from outperform at RBC Capital.
• Zimmer (ZMH) was upgraded to overweight from neutral at JPMorgan.
• Thermo Fisher (TMO) was upgraded to buy from hold at Jefferies.

Analyst upgrades

• Deutsche Bank upgraded Sonoco Products (SON) to buy from hold after the company reported Q1 results and raised guidance. The firm upped its target for shares to $38 from $32.
• Baird upgraded Western Digital (WDC) to outperform from neutral following the solid Q3 report and guidance. The firm raised its target to $50 from $48.
• Goldman upgraded Qwest (Q) to neutral from sell. Qwest is being acquired by CenturyLink (CTL).
• Hershey (HSY) was upgraded to neutral from underweight at JPMorgan.
• Principal Financial (PFG) was upgraded to neutral from sell at UBS.
• Monster Worldwide (MWW) was upgraded to market perform from underperform at Wells Fargo.

Baxter International's (BAX) shares have bumped up against resistance at $60 over the past three months, but I'm reiterating my buy rating for the company's shares, first recommended on March 13, 2009, at a price of $51.16. Here's why:

Versatility remains Baxter's key. Baxter makes a variety of medical products across three divisions, including drugs and vaccines, dialysis equipment, and IV supplies. The company should record a FY2010 revenue increase of 7% to 10%, led by demand for recombinants, plasma proteins, and antibody therapies in its bioscience unit.

"Baxter International (BAX) benefits from a robust balance sheet, solid operating momentum, and rising earnings estimates," says blue chip advisor Richard Moroney in Dow Theory Forecasts.

The advisor explains, "The first company to commercially prepare intravenous treatments, Baxter has manufactured and distributed medical products since 1931. It primarily works with blood and plasma, a business with recession-resistant tendencies.

"Its BioScience unit produces clotting agents for hemophilia and biotech drugs that treat both immune deficiencies and cancer.

"Being contrarians, we are always looking for laggard stocks with the potential to rebound," says turnaround expert George Putnam.

In his The Turnaround Letter, the advisor reviews four medical and pharmaceutical stocks that have been among the worst performers in the S&P 100 since the market bottom. Despite their poor performance, he thinks they may be due for a rebound.

"We think that investors who got left behind by the first leg of the market rally are struggling to catch up.