Analyst upgrades:

• Citigroup upgraded Advanced Micro (NYSE: AMD) to Buy from Hold and raised its target to $5.50 from $4.25 citing valuation and expectations for the company's competitive position and gross margins to improve.
• Barclays upgraded American Express (NYSE: AXP) to Overweight from Equal Weight citing long-term earnings growth as the company benefits from declining charge-offs and credit costs. The firm has a $38 target on the stock.
• JPMorgan upgraded Arch Coal (NYSE: ACI) to Overweight from Neutral and raised its target to $22 from $19 citing the FTC approval for the acquisition of Jacobs Ranch mine and valuation.
• Bebe Stores (NASDAQ: BEBE) was upgraded to Overweight from Equal Weight at Stephens.
• Cheesecake Factory (NASDAQ: CAKE) was upgraded to Neutral from Underweight at Piper Jaffray.
• Ashland (NYSE: ASH) was upgraded to Buy from Hold at KeyBanc.

Just call Ashland a specialist at mixing things. Ashland (NYSE: ASH) makes specialty resins, polymers, and adhesives for sale in North America and Europe. It also owns the Valvoline oil brand and oil service chain, and the Zerex anti-freeze brand, among other business operations.

In Q1, Ashland exceeded the First Call EPS estimate, despite sluggish-to-poor demand conditions that saw volumes decline 10-40%. Further, the integration of acquired Hercules Inc. has gone well, with more than $60 million in operational savings registered as of the close of Q1. The First Call F2009 / F2010 EPS estimates for ASH are $1.52 / $1.95.

Shares of U.S. Steel Corp. (NYSE: X) and Hercules Inc. (NYSE: HPC) soared Tuesday after the former reported that its third-quarter profits more than tripled and the latter said during its Q3 report that the necessary regulatory approval had been received for its acquisition by rival chemical company Ashland Inc. (NYSE: ASH).

Pittsburgh-based U.S. Steel reported the most profitable quarter in its history as higher prices led to record gains in its tubular and flat-rolled steel businesses. Its net income totaled $919 million, or $7.79 per share, in the quarter, which was 70.8% higher than a year earlier, and quarterly sales soared 68% to $7.31 billion. Excluding one-time charges related to a union labor agreement and environmental remediation, U.S. Steel earned $8.79 per share.

Analysts polled by Thomson Reuters, on average, had predicted earnings of $7.09 per share on revenue of $7.2 billion.

The company warned that the volatile global economic climate could hurt results for the rest of the year. Steel prices have deteriorated globally in recent weeks as demand has slowed.

After falling to a 52-week low on Tuesday morning, shares rose 14.2% to close at $35.20. Shares are down 70.8% year to date.

John Reese is an expert in analyzing the investment criteria of "legendary" advisors with time-tested strategies. And one market approach that may be of particular interest to investors during the current period of market turmoil is the value strategy developed by Benjamin Graham. (For more on this strategy, see our other post, "Three Rules of Value Investing".)

In his Validea newsletter, John reese explains, "Benjamin Graham -- considered the greatest investment guru by Warren Buffett -- built his reputation by using an extremely conservative, low-risk approach to investing." Buffett, incidentally, was Ben Graham's student.

Reese continues, "To Graham, preserving one's original capital was every bit as important as netting big gains. Having lived through the 1929 market crash, it's no surprise that the strategy Graham laid out in his classic book The Intelligent Investor was a conservative, loss-averse approach.

"To Graham, an investment wasn't something that could be turned into quick, easy profits; anything that offers such 'easy' rewards also comes with substantial risk, and Graham abhorred risk. In terms of specifics, Graham's approach limited risk in a number of ways, and my Graham-based model lays out several of those methods.

Investment bankers are keeping busy with chemical companies lately. For example, yesterday The Dow Chemical Company (NYSE: DOW) announced a $15.4 billion buyout of Rohm & Haas (NYSE: ROH), which even included an investment from Warren Buffett.

Then today, we got another deal. That is, Ashland Inc. (NYSE: ASH), which is the #1 chemical distributor in the US, has agreed to pay $3.3 billion for Hercules Inc. (NYSE: HPC). The consideration is a mixture of cash and stock. Moreover, Bank of America Corporation (NYSE: BAC) and Scotia Capital will provide the bank financing on the transaction.

Hercules got its start in 1912, as a spin-off from E.I. du Pont de Nemours & Company (NYSE: DD). Now, the company is a major provider of water-treatment chemicals (with a focus on the pulp and paper industries). It's an attractive segment – especially because of the opportunities in emerging markets.

MOST NOTEWORTHY: ConocoPhillips, Ashland and Wynn Resorts were today's noteworthy upgrades:

• Goldman upgraded ConocoPhillips (NYSE: COP) to Buy from Neutral, as they see the stock as inexpensive but views the upgrade "as much about avoiding near-term earnings risk with our pure-play refiners."
  
• Jefferies upgraded shares of Ashland (NYSE: ASH) to Buy from Hold on valuation as they find the risk/reward "intriguing" at current levels.
  
• Bear upgraded Wynn Resorts (NASDAQ: WYNN) to Outperform from Peer Perform citing valuation and Macau operating momentum.

OTHER UPGRADES:

• Photon Dynamics (NASDAQ: PHTN) was raised to overweight from Equal Weight at Lehman.
  
• PepsiAmericas (NYSE: PAS) was upgraded to Neutral from Underweight at HSBC.
  
• JP Morgan upgraded Nordic American Tanker (NYSE: NAT) to Neutral from Underweight.

MOST NOTEWORTHY: Smart Balance, Cascal NV and Ashland were today's noteworthy initiations:

• Citigroup initiated Smart Balance (NASDAQ: SMBL) with a Hold rating and $9 target, as they believe success of the company's new products is not a foregone conclusion and prefers to wait for increased visibility before becoming more positive on the name.
  
• JP Morgan believes Cascal NV (NYSE: HOO) will leverage its global scale and expertise in water infrastructure markets to drive 25% annual EPS growth through 2010. The firm has an Overweight rating on the stock.
  
• Ashland (NYSE: ASH) was started with a Positive rating as Susquehanna, as they are positive on ASH's earnings power. The firm views shares as a compelling risk/reward opportunity.

OTHER INITIATIONS:

• Broadpoint assumed SuccessFactors (NASDAQ: SFSF) with a Strong Buy rating and $12 target.
  
• Morgan Stanley initiated Fastenal (NASDAQ: FAST) with an Equal Weight rating and $40 target.
  
• RBC Capital started Ultra Petroleum (NYSE: UPL) with a Sector Perform rating and $80 target.

Market pullbacks and periods of protracted economic sluggishness are not the most tranquil circumstances, to say the least, but they do create value plays, and with the above in mind, Ashland is worth a review.

Ashland Inc. (NYSE: ASH) is a global, diversified chemical company that's involved in the plastic, resin/polymer, water treatment, and oil-change fields.

Analysts expect high-single-digit revenue growth for Ashland's water technology and Valvoline segments, but softer growth in performance materials and chemicals.

Further, a restructuring initiative is yielding cost reductions; margins remain adequate. Moreover, there is a sense that ASH's shares do not reflect the improving outlook in many of ASH's businesses, and ASH's p/e of 14 speaks to that undervaluation. The Reuters FY 2008/FY 2009 EPS consensus estimates for ASH are $3.19/$3.83.

MOST NOTEWORTHY: Shire Plc (SHPGY), Cablevision Systems Corp (CVC), Yahoo! (YHOO), Ensco International (ESV) and Clear Channel Outdoor Holdings (CCO) were today's noteworthy downgrades:

• JP Morgan downgraded shares of Shire Plc (NASDAQ: SHPGY) to Neutral from Overweight to reflect risk of Adderall XR patients switching to Vyvanse.

• Deutsche Bank cut Cablevision (NYSE: CVC) to Hold from Buy, saying shares reflect a likely higher bid from the Dolan family.

• ThinkEquity downgraded shares of Yahoo! (NASDAQ: YHOO) to Accumulate from Buy following checks that indicate marginal Panama upside, poor execution in premium display and an incomplete/vulnerable non-premium display strategy.

• Credit Suisse cut Ensco International (NYSE: ESV) to Underperform from Neutral on valuation.

• SMH Capital downgraded Clear Channel Outdoors (NYSE: CCO) to Sell from Neutral and recommended investors to swap into Lamar Advertising Co (NASDAQ: LAMR), based on the company's higher-quality name in the outdoor advertising sub-space...

OTHER DOWNGRADES:

• Baidu.com (NASDAQ: BIDU) was cut to Hold from Buy at Citigroup.

• Brinker International (NYSE: EAT) was downgraded to Underweight from Equal Weight at Morgan Stanley.

• Hilliard Lyons downgraded Nike Inc (NYSE: NKE) to Neutral from Long-Term Buy.

• Buckingham cut Ashland Inc (NYSE: ASH) and Cabot Corp (NYSE: CBT) to Neutral from Accumulate.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).