Analyst upgrades:

• Citigroup upgraded Adtran (NASDAQ: ADTN) to Buy from Hold on expectations the company will benefit from the broadband Stimulus funds.
• Morgan Stanley upgraded Continental Airlines (NYSE: CAL) to Overweight from Equal Weight based on relative valuation and views the company as a "survivor." Additionally, the analyst lowered 2009 industry estimates but believes it is the last cut for the year and is incrementally more positive on the sector.
• Morgan Stanley also upgraded EXFO Electro-Optical (NASDAQ: EXFO) to Overweight from Market Weight based on valuation.
• Tata Motors (NYSE: TTM) was upgraded to Buy from Hold at Deutsche Bank.
• Ascent Solar (NASDAQ: ASTI) was upgraded to Neutral from Underweight at JP Morgan.
• Mechel Steel (NYSE: MTL) was upgraded to Neutral from Underperform at Credit Suisse.

Dragged down by the challenging market conditions, many stocks have fallen under $10 lately. CNBC's Cindy Perman suggests that some of these stocks could be become good investments for traders. However, not everything that is cheap could be such a good bargain, Perman reminds us. You must always do your homework on potential investment before buying.

For example, Ford Motor (NYSE: F) fell down to around $6 compared with $38 nine years ago -- is it a good investment? Well, while the automaker revealed its plans to shift production from trucks to cars and give a boost to its turnaround plan, it also warned it won't be profitable until 2010 at the earliest.

Perman quotes several investment specialists on the matter. John Schloegel, vice president of investment strategies at Capital Cities Asset Management says, "An investment in Ford today feels like being in the wrong place at the wrong time." And Greg Womack, president of Womack Investment Advisers, advices to stay away from the sector, which doesn't look promising now, for the next three to five years to find out the "winner."

The historical trade-off between the price of oil and natural gas has been 6 to 1, meaning if oil sold for $30 per barrel and natural gas for $5 per mmcf, the two commodities would be equally priced on a BTU basis.

Therefore, a natural substitution effect occurs. When oil is greater than six times the price of natural gas, it would be cheaper for consumers of energy to substitute gas for oil. Conversely, if oil were less the six times the price of natural gas, it would be cheaper to use oil and switch away from using gas. This substitution effect pretty much kept this ratio in tact.

However, in today's market, with oil at $82 per barrel and natural gas selling for $6.00 per mmcf, that ratio has expanded to 13.6x (!). That's huge. This means consumers of energy should be switching all their energy consumption away from oil to natural gas.

How should investors play this? One way is to short oil and go long natural gas. However, that could prove to be a risky strategy. Another way is to look at merchant power producers that use natural gas. Two plays are The AES Corporation (NYSE: AES) and Dynegy Inc (NYSE: DYN). Both use a good amount of gas to produce power and both have corrected rather meaningfully during this market downturn and represent good value.

The Washington Post reports that pension fund managers representing $1 trillion have petitioned the Securities and Exchange Commission (SEC) to required public companies to disclose the impact of global warming on their business prospects. If the SEC agrees, the change could threaten investors in utility stocks -- which are among the biggest private sources of carbon dioxide emissions that cause global warming.

Here's a list of utility stocks which could be most affected:

• American Electric Power (NYSE: AEP). AEP produced 145.4 million tons of carbon dioxide in 2006. In Europe, where legislation already limits carbon dioxide emissions, allowances for a ton of carbon dioxide sell or 20.5 euros, or about $28.50. So if its 2006 carbon dioxide had been emitted in Europe, AEP would have had to pay over $4 billion.
• Dominion Resources (NYSE: D)
• Dynegy (NYSE: DYN)
• Xcel Energy (NYSE: XEL)

Coal producer, Peabody Energy Corp. (NYSE: BTU) could also be among those companies affected.

Power generation stocks, such as Dynegy Inc (NYSE: DYN) and AES Corporation (NYSE: AES), have gotten beaten up pretty good the past few weeks. We blogged recently about the merits of jumping into AES. But Dynegy is another company that investors should look into after the recent market weakness.

As we blogged yesterday, investors should look at sectors that got hit hard in the tech-telecom bubble, as scars in these sectors run deep and investors are quick to run for the hills even though industry fundamentals are much improved. The same can be said for the power generation business.

The power generation business, particularly the merchant power producers, went through a similar type of bust cycle as the telecom sector, with many companies entering bankruptcy. However, Dynegy, which was a must-own stock along with Enron in the late 1990s, was able to avoid bankruptcy, bring in new management, dispose of its money losing tolling arrangement and recently made a large acquisition of a privately held power generator which will help it to grow.

Management in Dynegy is top notch, having come from Duke Power, and has executed magnificently to turn this company around and turn it into an important player in the power generation business. This is one stock your want to consider for your buy list on this market correction.

As a follow up to my blog yesterday, here are a few other ideas to look at as this stock market correction continues to unfold.

Newell Rubbermaid Inc (NYSE: NWL), a stock we have blogged about the merits of repeatedly during the past year, is holding up steady. There are a couple of reasons for this -- first, Newell, as a consumer staple company, attracts money during volatile markets, and second, the belief that its turnaround is for real.

Dynegy Inc (NYSE: DYN) is also holding up well. Similar to the IP transport companies blogged about yesterday, this stock typically got hit hard during these market corrections during the past few years. However, in this selloff, it has declined little. With private equity firms eyeing TXU, investors are beginning to believe in the merchant power business again.

Use this correction and current bout with fear to pick up some good stocks. Newell and Dynegy are companies to throw into your portfolio.

Dynegy Inc. (NYSE:DYN) will generate free cash flow in 2007, according to a company press release this morning. The company also held a call with investors at 8:00 am to discuss its outlook for 2007. It looks pretty good.

The combined company -- Dynegy and LS Power Group -- is expected to produce:

• Free cash flow of $415 million to $515 million.
• EBITDA of more than $1 billion.
• Net income between $190 million to $255 million.
• Combination on track for completion at the end of the first quarter 2007.

Dynegy was burning huge amounts of cash a few years ago due to bad tolling agreements. The company is now on the growth path again and is up over 40% since we recommended getting into the stock in May.

Enron is gone, but Dynegy is alive and well. Many good things are about to happen at this company.

Monday December 11

• Hartford Financial (NYSE: HIG) to hold a 10am conference call regarding 2007 earnings guidance
• FCC to hold a hearing on Media Ownership at 1pm
• Texas Instruments (NYSE: TXN) to hold Q4 mid-quarter update at 5pm

Tuesday December 12

• Six Flags (NYSE: SIX) to hold mid-quarter update at 8:30am
• Goldman Sachs (NYSE: GS) to hold Q4 earnings conference call at 11am
• General Electric (NYSE: GE) to hold financial update conference call at 3pm

Wednesday December 13

• Dynegy (NYSE: DYN) to hold 2007 earnings and cash flow estimates webcast at 8am
• Pennsylvania Gaming Control Board to hold public hearing at 9am

Thursday December 14

• Bear Stearns (NYSE: BSC) to hold Q4 earnings conference call at 10am
• PDUFA Date for Novartis' (NYSE: NVS) Rasilez

Friday December 15

• PDUFA Date for Oscient Pharmaceuticals' (NASDAQ: OSCI) Factive

Analysis and reporting fromTheflyonthewall.com (subscription only)

Theflyonthewall.com blogged back in the spring that investors should look at Dynegy (NYSE:DYN), a survivor in the merchant energy trading business. This is one company that is quietly coming back to life. It was able to bring in new management to appease bond holders and avoid bankruptcy -- unlike Enron.

The Fly blogged that investors should take advantage of a temporary price weakness to either build a position or for a quick trade. Today, the stock is selling for $6.79, for a 48% gain.

What should investors do now? Stay with this stock.

New management is becoming a leading consolidator of the merchant power business in the US. Dynegy has taken care of its money-losing toll arrangements, restructured its debt and should generate a good amount of cash in 2007.

The leader behind this effort is Bruce Williamson, a long-time executive at Duke Power. Williamson has been with the company since the early part of the decade and accomplished quite a lot. Williamson has clearly said he is optimistic about the long-term prospects for this industry and a lot of money should be made for shareholders.

While the aftermath of the Enron trail is still fresh in the minds of investors, Dynegy is building a solid foundation for growth and good shareholder returns.