Analyst upgrades:

• Keefe Bruyette upgraded Blackstone Group (BX) to outperform from market perform following the company's Q3 results and maintains an $18.50 price target on shares.
• Baird upgraded Astec (ASTE) to outperform from neutral citing relative valuation and upside from new multi-year U.S. highway funding legislation. The firm raised its target to $33 from $27.
• Goldman upgraded Abercrombie & Fitch (ANF) to conviction buy from neutral citing "significant" long-term growth drivers that include international growth. The firm raised its target to $45 from $36.
• Ariad Pharmaceuticals (ARIA) was upgraded to overweight from neutral at JPMorgan.
• Energizer (ENR) was upgraded to overweight from equal weight at Morgan Stanley.
• AstraZeneca (AZN) was upgraded to buy from hold at RBS.

"Investors considering high-yield stocks should consider financial strength; in our quantitative model, Quadrix, we assess profit margins, interest coverage, and debt levels," says Richard Moroney.

In Dow Theory Forecasts, a newsletter that has been published for over 5 decades -- he looks at two stocks that score high in this area: drug manufacturer, AstraZeneca (NYSE: AZN) and defense industry player, General Dynamics (NYSE: GD). Here, the advisor reviews the two companies.

"AstraZeneca's operating cash flow jumped 24% in the first half of 2009, allowing the company to retire $3 billion in debt since the end of 2008.

There is good news surfacing for pharmaceutical firm AstraZeneca (NYSE: AZN) this morning. Turns out a new drug produced by AZN helps reduce heart patients' chances of dying by more than 20% when compared to the standard treatment. The drug is designed to prevent blood clots in heart patients.

The study followed 18,624 patients from 2006 to 2008, with roughly half taking rival medicine Plavix and the other half taking AZN's Brilinta. The results show that patients taking Brilinta had a 4.5% chance of dying, compared to a 5.9% chance for patients on Plavix.

Stocks are up this year but not everyone is profiting. One reason is that many investors, stung by the market collapse, have been looking for safety by investing in dividend paying stocks. But Richard Moroney, editor of Dow Theory Forecasts, says that investing for yield is a flawed strategy.

Moroney, a chartered financial analyst, points out that while the S&P 1500 Index is up about 16% so far this year, investors in high-yielding stocks (with yields of 4% or more) have a year-to-date return of just 4%. And he says that stocks that do not pay dividends are up an average of 29%.

We spoke with Richard Moroney to find out why this is the case -- and what income investors should do.

In a review of the pharmaceutical sector, Chuck Carlson selects his favorite International stocks which also offer direct-purchase plans for U.S. investors.

Here's a look at two of these stocks -- United Kingdom-based AstraZeneca (NYSE: AZN) and Denmark-based Novo Nordisk (NYSE: NVO) -- from his The DRIP Investor, a newsletter focused on long-term, high quality investments.

"AstraZeneca is a leading pharmaceutical firm. The company boasts a portfolio that includes 11 products that generate more than $1 billion each in annual sales.

AstraZeneca (NYSE: AZN - option chain) shares are rising today after the company said its experimental heart pill, Brilinta, was more effective at preventing heart attacks and strokes in a large clinical trial than Plavix, a drug made by competitors Sanofi-Aventis (NYSE: SNY) and Bristol-Myers Squibb (NYSE: BMY). If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AZN.

AZN opened this morning at $38.16. So far today the stock has hit a low of $37.83 and at 11:25 is trading at the days high of $38.21, up 2.07 (5.7%). The chart for AZN looks neutral and S&P gives AZN a neutral 3 STARS (out of 5) hold ranking.

"Long-time healthcare investors can be forgiven their confusion; drug stocks are supposed to be defensive, but many of the largest drugmakers have been pounded," observes Richard Moroney.

Nevertheless, in the blue chip Dow Theory Forecasts, the advisor sees two favorite healthcare and pharmaceutical issues as long-term opportunities: AstraZeneca (NYSE: AZN) and Johnson & Johnson (NYSE: JNJ).

Moroney explains, "Healthcare companies' profits are supposed to remain fairly steady regardless of the economic situation. But hospitals' capital spending fell in the December quarter, and many consumers are putting off medical care because they cannot afford it.

Teva Pharmaceuticals (NASDAQ: TEVA - option chain) shares have moved higher today after the Food & Drug Administration approved the company's generic version Pulmicort, an asthma drug made by competitor AstraZeneca (NYSE: AZN). If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TEVA.

TEVA opened this morning at $43.00. So far today the stock has hit a low of $42.55 and a high of $43.78. As of 12:25, TEVA is trading at $42.84, up $0.65 (1.5%). The chart for TEVA looks bullish and S&P gives TEVA a positive 5 STARS (out of 5) strong buy ranking.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $35 range.

MOST NOTEWORTHY: Merck, On2 Technologies and Zions Bancorp were today's noteworthy downgrades:

• UBS downgraded Merck & Co Inc (NYSE: MRK) to Neutral from Buy citing slowing Gardasil trends and vaccine supply issues.
• Merriman cut On2 Technologies Inc (AMEX: ONT) to Neutral from Buy to reflect the reduced visibility into financials and management changes.
• Baird downgraded shares of Zions Bancorporation (NASDAQ: ZION) to Neutral from Outperform to reflect deteriorating credit quality and growing capital concerns. The firm lowered their target price to $32 from $43.

OTHER DOWNGRADES:

• AstraZeneca Plc (NYSE: AZN) was downgraded to Hold from Buy at Deutsche Bank.
• JP Morgan lowered Marshall & Ilsley Corporation (NYSE: MI) to Underweight from Neutral.
• Acme Packet Inc (NASDAQ: APKT) was downgraded to Neutral from Buy at Piper.

MAJOR PAPERS:

• The Wall Street Journal reported that is is not yet certain whether Merrill Lynch & Co Inc (NYSE: MER) will need to raise money. If it does, selling common stock could be expensive due to a 12-month protection the bank offered the investors that bought $12B in common and preferred shares earlier this year and selling assets like its interest in Bloomberg may present a different problem.
• The Wall Street Journal also reported that investigators from the European Union are probing deeper into the pharmaceutical industry in an effort to determine whether drug companies have used unfair tactics to increase prices and block competition. Investigators have reportedly ask for views on direct-to-pharmacy distribution channels, which Pfizer Inc (NYSE: PFE) and AstraZeneca Plc (NYSE: AZN) recently established in Britain.
• After Anheuser-Busch Companies Inc (NYSE: BUD) said it would reject InBev's $46B bid as "financially inadequate," InBev said it would launch a hostile bid. According to court documents, the Financial Times reported that InBev is preparing to launch a proxy battle seeking the removal of Anheuser's entire board.
• The Financial Times also reported that soaring energy prices are forcing U.S. consumer goods company The Procter & Gamble Company (NYSE: PG) to rethink how it distributes products. The company may consider shifting manufacturing sites closer to consumers in order to lower its transport bill.

"You can invest for all the right reasons and still get the wrong result," notes long-standing turnaround stock expert George Putnam, referring to the poor performance of the pharmaceutical sector in recent years.

Here, in his industry-leading The Turnaround Letter, he offers a fascinating review of 10 leading drug stocks which he now believes offer a combination of growth potential at "pretty cheap" valuations. Here is his overview.

"In 2000 and 2001, when the Internet boom was becoming a bust, many smart investors turned away from technology stocks and put their money into drug stocks. How could you go wrong with the big pharmaceutical companies?

"Demand for their products was growing as the population aged. These companies had huge research
and development programs that seemed to keep cranking out new blockbuster drugs. And most of them had great balance sheets, with many paying handsome dividends.

"Much of this reasoning has been borne out in the intervening years. Many large drug manufacturers have rung up substantial revenue gains over the last decade. So what's happened to the big drug stocks? With few exceptions they have gone sideways or down – in some cases down a lot.

MAJOR PAPERS:

• In what may trump a GBP1.6B bid from a private-equity led consortium consisting of The Goldman Sachs Group Inc's (NYSE: GS) Goldman Sachs Capital Partners, Candover Investment (OTC: CDRIF), and Alpinvest, Expro International Group (OTC: EXPRF) said it received a GBP1.71B bid proposal from Halliburton Company (NYSE: HAL), the Wall Street Journal reported. Expro said the proposal "does not amount to a firm intention to make an offer and is subject to certain preconditions."
• The Wall Street Journal also reported that the oil industry and some U.S. lawmakers are looking to end long-standing bans on domestic drilling put in place to protect areas that are environmentally-sensitive, fueled by concerns about global energy.
• In an interview with the Financial Times, Citigroup Incorporated's (NYSE: C) former chairman and CEO Sandy Weill acknowledged that choosing Chuck Prince as his successor in 2003 turned out not to be the "right thing" for the company and was flawed. Instead of handing the job to Prince, Weill said the board should have fostered competition among the bank's top managers for the job.

OTHER PAPERS:

• According to the Washington Post, MedImmune, a unit of drug giant AstraZeneca Plc (NYSE: AZN),settled with Genentech Inc (NYSE: DNA) a lawsuit over a patented component of its best-selling drug Synagis, which is aimed at preventing respiratory infections in infants. No details of the settlement were provided.

AstraZeneca (NYSE: AZN) shares are trading higher after the FDA approved the company's anti-psychotic drug Seroquel as a maintenance treatment for patients with bipolar disorder. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AZN.

After hitting a one-year high of $56.60 in July, the stock hit a one-year low of $35.03 in March. AZN opened this morning at $41.50. So far today the stock has hit a low of $41.29 and a high of $41.76. As of 11:55, AZN is trading at $41.42, up $0.75 (1.8%). The chart for AZN looks bullish and deteriorating slightly, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 14.9% return in just five months as long as AZN is above $35 at October expiration. AZN would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.

MOST NOTEWORTHY: AbitibiBowater, GlaxoSmithKline, AstraZeneca and Capital One were today's noteworthy downgrades:

• Lehman downgraded AbitibiBowater (NYSE: ABH) to Equal Weight from Overweight citing dilution from the recent $350M convertible offering, cost pressures, and a more cautious outlook near-term for pulp markets.
  
• JP Morgan cut GlaxoSmithKline (NYSE: GSK) and AstraZeneca (NYSE: AZN) to Underweight from Neutral on long-term earnings growth concerns.
  
• Keefe Bruyette lowered Capital One (NYSE: COF) to Underperform from Market Perform to reflect the company's credit outlook.

OTHER DOWNGRADES:

• Nokia (NYSE: NOK) was downgraded to Neutral from Buy at UBS and to Underweight from Overweight at JP Morgan.
  
• Textron (NYSE: TXT) was cut at Credit Suisse to Neutral from Outperform.
  
• Merriman downgraded Blue Coat Systems (NASDAQ: BCSI) to Neutral from Buy.

MOST NOTEWORTHY: AstraZeneca, Massey Energy and Freeport McMoRan were today's noteworthy upgrades:

• Dresdner Kleinwort upgraded shares of AstraZeneca (NYSE: AZN) to Buy from Hold following the company's settlement with Ranbaxy on the Nexium patent.
  
• Massey Energy (NYSE: MEE) was raised to Overweight from Neutral at Massey Energy citing the company's leverage to metallurgical coal prices in 2009.
  
• Freeport McMoRan (NYSE: FCX) was upgraded at HSBC to Overweight from Neutral on valuation.

OTHER UPGRADES:

• Arcelor Mittal (NYSE: MT) was upgraded to Buy from Hold at Citigroup.
  
• Merrill upgraded Bernis (NYSE: BMS) to Neutral from Sell.