Analyst Upgrades

• Chesapeake (CHK) to buy from hold at Canaccord.
• Biogen (BIIB) and Regeneron (REGN) to outperform from sector perform at RBC Capital.
• Caribou Coffee (CBOU) to outperform from neutral and Encore Energy (ENP) to neutral from underperform at RW Baird.
• Fluor (FLR) to market perform from underperform at BMO Capital.
• Hornbeck Offshore (HOS) to conviction buy from neutral at Goldman.
• Saks (SKS) and Zale (ZLC) to neutral from underperform at BofA/Merrill.

They don't all work out. The stock of offshore oil/natural gas servicer Hornbeck Offshore Services (HOS), first written about here on May 28, 2009 at a price of $27.08, was stopped-out at $14, for a roughly 13-point loss.

In March, Hornbeck's stock formed a bear-hug -- a bearish stock pattern, from a technical analysis standpoint -- then moved lower after the Deepwater Horizon oil spill in the Gulf of Mexico.

They don't all work out. The stock of offshore oil/natural gas servicer Hornbeck Offshore Services (HOS), first written about here on May 28, 2009, at a price of $27.08, has collapsed, and has formed a bear hug -- a bearish stock pattern, from a technical analysis standpoint.

Hornbeck reported Q4 2009 EPS of 32 cents, 1 cent below the First Call Q4 2009 EPS estimate of 33 cents, and after some brief short-covering, Wall Street's selling of HOS commenced anew, taking shares down to about $17, before a recent pop-up to $19.

Offshore oil servicer Hornbeck Offshore (NYSE: HOS), first recommended on May 28, 2009 at a price of $27.08, twice within the past 60 days broke below the key, 50-day moving average.

Historically, that would be enough to re-evaluate the investment, but the stock did the re-valuation work on its own, recovering to the $27.08 entry point this month.

"With high-quality stocks on sale, now seems an opportune time to look for bargains among small and midcap blue chips," suggests Richard Moroney.

In his Upside Stocks advisory, which uses the quantitative-based Quadrix ratings system, he says, "We've found several 'Best Buys' with superior year-ahead potential."

Here, the analyst looks at Aeropostale (NYSE: ARO), Catalyst Health (NASDAQ: CHSI) and Hornbeck Offshore (NYSE: HOS).

Readers of this space know that one of the preferred sectors is oil/oil services, and with the aforementioned in mind, Hornbeck Offshore (NYSE: HOS).

In general, analysts expect short-term doldrums for offshore oil servicer Hornbeck, primarily due to a decrease in demand for crude oil in North America.

However, heading into F2010 HOS should benefit from increased deepwater drilling in the Gulf of Mexico, particularly as oil's price firms later in 2009, as the U.S. economic recovery takes hold.

Hornbeck Offshore Services (NYSE: HOS) provides technologically advanced offshore supply vessels, primarily in the U.S. Gulf of Mexico and select international markets. It is also a leading transporter of petroleum products, through a fleet of ocean-going tugs and tank barges in the northeastern U.S., the U.S. Gulf of Mexico and Puerto Rico. The company's fleet of over eighty vessels primarily serves the energy industry. Clients include Anadarko Petroleum (NYSE: APC), Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP).

Hornbeck pleased investors earlier in the month, when it reported Q3 EPS of $1.09 and revenues of $94.7 million. Analysts had been expecting 83 cents and $88.9 million. Management also guided FY07 EPS to $3.28-$3.52, versus consensus of $3.17. HOS shares popped on the news and then moved into a bullish "flag" consolidation pattern Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

MOST NOTEWORTHY: The Major European Pharmaceutical Sector was the most notable downgrade this morning.

• Lehman Bros. downgraded the Major European Pharmaceutical Sector based on its 2007 outlook.
  
• The firm downgraded Sanofi-Aventis ADS (NYSE: SNY) and Glaxosmithkline plc ADS (NYSE: GSK) to Equal Weight from Overweight.

OTHER DOWNGRADES:

• Deutsche Bank is cautious on British Airways' ADS (NYSE: BAB) 2007 outlook and downgraded the airliner to Sell from Hold, citing valuation.

• Goldman Sachs downgraded Hornbeck Offshore Svc (NYSE: HOS) to Sell from Neutral following the driller's disappointing fourth quarter outlook.

• Wachovia downgraded CACI Int'l (NYSE: CAI) to Market Perform from Outperform following the sudden announcement last night that CFO Waechter has resigned from the company.

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

The S&P 500 has announced several changes to the index. Ensco International (NYSE:ESV) is replacing BellSouth (NYSE:BLS). Cimarex (NYSE:XEC) will join the S&P Midcap 400. Hornbeck Offshore Services (NYSE:HOS) will join the Small Cap 600.

As the stocks are added to major indices, many index funds will be forced to buy them to stay current with the indices they track. Other "closet index funds" may add them as well. Should you?

If history is any guide, probably not. According to a piece in last week's Wall Street Journal [subscription required]: "... buy stocks that have been removed from the S&P 500. Those that suffered that indignity this year are up 27% on average since removal, while those that were added to the index are up only 1% since joining, notes Paul Hickey of Birinyi Associates."

While there were no stocks demoted in this group (BellSouth is no longer listed as it was acquired by AT&T.), the data would seem to suggest that investors may do well to avoid ESV and possibly HOS and XEC too.