Charles Schwab (SCHW) has announced its decision to acquire optionsXpress (OXPS) in a friendly all-stock deal. This deal will help Schwab compete with other firms like E-Trade (ETFC), Ameritrade (AMTD), and Bank of America (BAC), which all have large online brokerage services and are vying to provide investors with the best tools and services.

The deal, which is expected to close by the third quarter of 2011, will cost Schwab $1 billion, and the company will issue 60 million new shares to swap each outstanding share of optionsXpress with 1.02 of its own shares. Our $19.74 price estimate for Charles Schwab is at a premium of almost 12% to its current market value.

E-Trade (ETFC) is a financial services company that provides online brokerage and related products and services to individual retail investors under the brand "E*TRADE Financial." The company also provides investor-focused banking products, primarily sweep deposits and savings products, to retail investors. It competes with firms like Charles Schwab Corporation (SCHW), Ameritrade (AMTD), Wells Fargo (WFC) and Bank of America (BAC).

We have launched coverage on E-Trade with an $18.87 price estimate for the company's stock, a premium of about 5% to market price.

Teams have been preparing their game plans and it's time to see which of the 60 teams will win. No, not the Packers or Steelers -- Go Pack! -- but PepsiCo (PEP), Anheuser-Busch (BUD), General Motors (GM) and all the other companies competing for the best spots in one of TV's most expensive marketing moments, costing an estimated $3 million dollars per 30 second spot.

For those not into football, the ads in the Super Bowl game can be more amusing than the game itself as advertising teams compete for attention, show their best efforts and even get rated by numerous online sites. Last year, Doritos (owned by PepsiCo), and E-Trade (ETFC) did well, and Anheuser-Busch seems to always have a Clydesdale horse in the running.

Analyst Upgrades

• NYSE Euronex (NYX) to conviction buy from neutral at Goldman.
• General Dynamics (GD) to buy from hold at Citigroup.
• Deere (DE), Parker-Hannifin (PH) and ExlService (EXLS) to overweight from neutral at JPMorgan.
• Aflac (AFL) to outperform from market perform at FBR Capital.
• Wynn Resorts (WYNN) to buy from neutral at Janney Capital.
• Amdocs (DOX) to buy from neutral at UBS.
• Juniper (JNPR) to buy from hold at ThinkEquity.
• Rudolph Tech (RTEC) and KLA-Tencor (KLAC) to perform from underperform at Oppenheimer.
• Hershey (HSY) and Pinnacle Entertainment (PNK) to outperform from market perform at Wells Fargo.
• Spirit AeroSystems (SPR) to equal weight from underweight at Morgan Stanley.
• Micron (MU) to outperform from neutral at RW Baird.

This is the fifth year that I am posting my stock picks for the year. There is a lot of foolishness in doing so because each year that I have made such suggestions, including 2009 when I owned all of the picks, it is assumed that I would hold all of the positions without responding to market conditions, or changes in the specific company. No adding to, or cutting a position. This is not the real world.

It is not possible for everything to remain static. For example, you might find that you hold a stock that made a great run through three quarters, beyond your wildest expectations, and decide it has passed a point where the metrics cannot support anything close to the price. Under normal circumstances you might sell it, except you cannot. By the end of the year the profit you might have realized fades away and you end up reporting on something that is not a true measure of your objective strategy. Nevertheless, once again I will stick with this approach because this seems to be how its done in every publication's annual picks. This year there are eleven.

During my tenure at BloggingStocks I have expressed my opinion often about the contribution that dividends make to your overall return. Most shrewd investors, and especially "my pal Warren," know this and understand why I re-emphasize the point when I make my annual selections.

By now I hope you have had a chance to peruse my picks for 2010. If not the links below will give you another opportunity.

For the first time my annual picks will include a stock option. I have written numerous blogs this year about something called "naked puts" -- that is a sell to open put position -- committing me to buy a certain number of shares by a certain date if the closing price is less than the strike price.

In this case I have selected the E*TRADE (ETFC) January 2011, $2.50 puts last traded on December 28, 2009 at $0.97 for a 39% return. If it expires, as I am betting it will, by the third Friday of that month I have no further obligation.

This type of option transaction is not available to most investors. It is marginable, but you pay no interest.

J.M. Smucker (SJM) closed at $53.48. SJM report Q2 EPS of $1.22 and revenue of $1.2 billion. December option implied volatility of 27 is near its 26-week average according to Track Data, suggesting non-directional movement after EPS.

ISE Sentiment Index-ISEE closed at 130 on 11/19/09. ISEE 10-day moving average is 136.

Two stocks with IV rise on November 19; E-Trade (ETFC) +31%, Monster Worldwide (MWW) +11%, according to IVolatility.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Analyst upgrades:

• UBS upgraded Apple (NASDAQ: AAPL) to Buy from Neutral and raised its target to $265 from $170, citing higher iPhone expectations, new partnerships, and likely upward revisions to Street estimates driven by gross margins.
• Wells Fargo upgraded Comcast (NASDAQ: CMCSA) to Outperform from Market Perform. The firm views a possible deal between end General Electric's (NYSE: GE) NBC Universal positively, as it thinks NBC will provide higher-margin growth for Comcast.
• Janney Montgomery upgraded Michael Baker (AMEX: BKR) to Buy from Neutral after the company completed the sale of its Energy business. The firm raised its target on shares to $46 from $40.
• Jefferies assumed coverage of Endo Pharma (NASDAQ: ENDP) and upgraded the stock to Buy from Hold. The firm cites valuation, a strong base business, and solid cash flow for the upgrade, and has a $30 target price on shares.
• Marten Transport (NASDAQ: MRTN) was upgraded to Overweight from Equal Weight at Stephens.
• U.S. Bancorp (NYSE: USB) was upgraded to Outperform from Market Perform at Keefe Bruyette.

Analyst Upgrades

• Baird upgraded Starbucks (NASDAQ: SBUX) to Outperform from Neutral based on field research that indicates improving traffic trends and visibility from cost savings initiatives.
• FBR Capital upgraded E*Trade (NASDAQ: ETFC) to Outperform from Underperform citing an attractive risk/reward following the company's capital raise and debt exchange commencement. The firm believes the worst is behind the company and has a $2 target on the stock.
• Oppenheimer upgraded Sonic (NASDAQ: SONC) to Outperform from Perform on expectations demand trends will improve, leading to more normalized profitability.
• Estee Lauder (NYSE: EL) was upgraded to Equal Weight from Underweight at Barclays.
• Motorola (NYSE: MOT) was upgraded to Buy from Neutral at BofA/Merrill.
• ConAgra (NYSE: CAG) was upgraded to Buy from Neutral at UBS.

TD Ameritrade Holding Corporation (NASDAQ: AMTD) reported earnings for its second fiscal quarter yesterday, and they were pretty decent for the most part -- some might have thought that investors were completely shunning the market because of all the volatility going on, but TD Ameritrade's results show that a broker can still make money in such a challenging climate.

Even so, overall revenues declined 3% to $623 million. While transaction-based revenues also declined, it should be noted that average client trades per day did increase 23% to 312,000. That's an important measure when talking about brokers such as TD Ameritrade, or competitors such as E TRADE Financial Corporation (NASDAQ: ETFC) and The Charles Schwab Corporation (NASDAQ: SCHW). Earnings per share really shined, rising 35% to $0.31 per diluted share.

TD Ameritrade is sticking to its earnings guidance of a "midpoint forecast of $1.32." Of course, I'd like to see raised guidance, but a reaffirmation is certainly better than a reduction in guidance. Besides, I have to go back to the challenging climate concern -- if TD is happy to keep the forecast right now, then this is definitely positive. Investors would probably do well to at least investigate the brokers. When the economy snaps back, they should rally higher from these levels. TD Ameritrade, while not right up against a 52-week high, actually isn't that far from it, interestingly enough.

Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.

MAJOR PAPERS:

• Jarrett Lilien, E-Trade Financial Corporation's (NASDAQ: ETFC) president and COO, who lost out on the CEO job last month to Donald Layton, is going to resign from the online brokerage firm, the Wall Street Journal reported; Layton doesn't plan to fill the position.
• Chinese Internet search firm Baidu.com Inc (NASDAQ: BIDU) is poised for aggressive growth but must also confront a number of obstacles, according to the Wall Street Journal's "Heard in Asia," including a number of lawsuits regarding its music services and a vacancy in the CFO position.
• Alibaba Group, a Chinese Internet company , is in advanced talks with investors to finance its acquisition of Yahoo! Inc's (NASDAQ: YHOO) stake to expand its management independence, the Wall Street Journal reported.

• According to inside sources, the New York Post reported that billionaire Joseph Lewis and former Bear Stearns Companies Inc (NYSE: BSC) CEO Jimmy Cayne are looking for a white knight that could surpass JPMorgan Chase & Co's (NYSE: JPM) takeover offer for Bear Lewis and Cayne have reportedly reached out to several private equity firms and overseas banks, including Barclays Plc (NYSE: BCS) and Credit Suisse Group (NYSE: CS).

• Medical supplies boss Michael Mastromarino, accused of stealing the body parts of around 1,000 corpses, has pleaded guilty to several charges in a deal with prosecutors. The BBC News reported that the Biomedical Tissue Services company shipped bones, skin and tendons to tissue-processing companies such as LifeCell Corporation (NASDAQ: LIFC) and Tutogen Medical Inc (AMEX: TTG), which are in turn facing hundreds of civil lawsuits.