Analyst Upgrades

• Wachovia upgraded Choice Hotels (NYSE: CHH) to Outperform from Market Perform based on its high margin franchise, valuation, and brand acquisition opportunities, among other reasons.
• Canaccord upgraded Freeport McMoRan (NYSE: FCX) to Buy from Speculative Buy based on asset and management quality, size, and liquidity, and view as a potential hedge against inflation and U.S. dollar weakness.
• Cowen upgraded Amazon.com (NASDAQ: AMZN) to Outperform from Neutral. The firm expects Amazon to gain more of the consumer wallet as it focuses on lower prices and a superior shopping experience vs. online and offline competitors.
• Ctrip.com (NASDAQ: CTRP) was upgraded to Buy from Neutral at Nomura.
• FedEx (NYSE: FDX) was upgraded to Overweight from Equal Weight at Barclays.
• Marathon Oil (NYSE: MRO) was upgraded to Neutral from Sell at Goldman.

This is the first in a series of trend-spotting tips from Hilary Kramer's newly-released book, Ahead of the Curve.

We've all heard of the parlor game, Six Degrees of Kevin Bacon. You can take the same principle of interconnections and apply it to trends. All trends have ripple effects, and sometimes the best opportunities are found not in the trend itself, but in industries several steps removed from, but related to, the trend.

Take the energy crunch that's affecting companies and economies around the world. This is an obvious trend, and you may fear oil and power companies are overvalued. So take it a step further. These industries need oil rigs and wind farms.

A step further? The need for hardware to build, run and maintain this complex equipment.

MAJOR PAPERS:

• The Wall Street Journal (subscription required) highlighted the struggles of casual dining chain Applebee's International (NADSAQ: APPB), where even the company's founder said "[Applebee's] doesn't have anything that would make me want to come back".

OTHER PAPERS:

• According to the U.K. Times, Vodafone Group (NYSE: VOD) is the favorite to win the European rights for Apple Inc's (NASDAQ: AAPL) iPhone, despite stiff competition from rivals Orange and T-Mobile.
• From BusinessWeek's "Inside Wall Street" column:
• There's talk that Warren Buffett may increase his 17% stake in USG Corporation (NYSE: USG) before the housing cycle turns.
• Demand is surging for Kaydon Corporation's (NYSE: KDN) anti-friction bearings, which are used in robotics, aerospace, and other industries, including wind power equipment.
• Analysts say United Retail Group Inc (NADSAQ: URGI) has perfected fashion for the large womens' market, size 14 and over.

If you're looking for a nice steady company, Kaydon Corp. (NYSE: KDN) could be an excellent addition to your portfolio. This company makes ball bearings, shock absorbers, sealing rings, and other industrial products for a wide variety of industries, from robotics to defense to medicine. Unless you're an engineer you may well never lay eyes on a Kaydon product, but there's a good chance your life is affected by Kaydon products on an almost daily basis.

Given the wide range of industries that rely on KDN products, I think this company has the potential to keep growing the way it has been doing for the past couple years. Revenues and operating income have been rising steadily; operating margins were down a bit last year, which the company attributes to the added costs of its efforts to expand into Europe and Asia. Ultimately these costs should generate more profits down the road, as should the company's decision to move one of its main factories from Baltimore to a much less expensive area in North Carolina. While the company expects this move to cost more than $1.6 million, the lower costs and expected efficiency improvements should far outweigh these costs.

Don't buy this company's stock if you're looking for a rapid growth because of great media or a flashy profile; but if you're interested in a slow and steady earner, KDN could be a very nice addition to your portfolio.

And, you never know, Kaydon could end up being acquired at a 30% or greater premium given numerous factors: Lots of cash in the bank, little debt, excellent management, and market dominance in supplying ball bearings to the large scale wind farms internationally.

Type of company: A manufacturer of a wide range of products used in a wide range of industries, with a solid history of growth, low debt, high cash reserves and a phenomenal management team.

Price target: KDN is currently trading near the top of its 52-week range. Its price has been a bit volatile over the last couple years, but ultimately it has grown steadily. I think it's a good pickup now, even above $50. Kaydon could easily reach $80 by mid-2008 -- maybe sooner if it ends up being acquired.

Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.