Over the long holiday weekend, I had a chance to do some much needed reading. Given my vocation, sometimes I like to read articles that have little to do with the markets or finance as a way of recharging my batteries.

Of course, even when I partake in this guilty pleasure, there really is no way to truly escape. Somehow every story has a link or relationship to investing that I can utilize in my stock-picking mission.

This weekend, it was an article critical of a Shape magazine cover featuring a bikini-clad Faith Hill that has import for individual investors. In this particular article, the author does a really great job of highlighting the battle of fitness versus self-image.

How exactly did the 41-year-old country singer get that body? Was it photoshopped? How about plastic surgery? Is it really fair to present her in that way without the caveats, if any? The image alone implies that this woman, a busy professional with young children, managed to eat right and exercise in a way that created the image you now see on the magazine -- and that you can achieve yourself.

Wow, what pressure. The problem, of course, is that Photoshop was probably used in this instance, and if not Photoshop, then plastic surgery for certain.

So what does this have to do with investing?

This morning I awoke to the news that Johnson & Johnson (NYSE: JNJ) announced a definitive agreement to purchase Mentor (NYSE: MNT), a leading supplier of medical products for the global aesthetic market -- namely, breast implants.

JNJ is paying $31 per share, or $1.07 billion in cash, for the company. The purchase price is about double what MNT fetched in the open market on Friday.

A premium price of that magnitude in this market environment is hard to believe, but I would not bet against JNJ here. They have their pulse on the market and a copy of Shape magazine on their desk. As the baby-boomer generation ages, plastic surgery looks to be a huge market. Fueled by images like those in Shape magazine, the market is more than worthy of a premium price.

The fact that MNT was valued at the purchase price as recently as June is telling. Yes, the economy is in recession, but the desire to improve self image is alive and well.

This is a brilliant deal for JNJ. The company enters a strong market with great demographics at a time of economic weakness. Taking advantage of a strong balance sheet and rich cash flow, JNJ is a winner in this economy.

Self-image issues aside, I like this deal.

Jamie Dlugosch is a contributor to InvestorPlace.com.

Johnson & Johnson (NYSE: JNJ - option chain) shares are lower today after the medical giant announced it would acquire breast implant company Mentor (NYSE: MNT). JNJ put the price for MNT at $31 per share, more than 90% above Friday's price of $16. This kind of buyout activity could signal a couple things. First JNJ is in pretty good financial shape and second that many stocks are undervalued and that resilient companies like JNJ might be looking into making moves in the coming months. 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 JNJ.

JNJ opened this morning at $57.66. So far today the stock has hit a low of $56.45 and a high of $57.82. As of 12:40, JNJ is trading at $56.49, down $2.09 (3.6%). The chart for JNJ looks bullish and S&P gives JNJ its highest 5 STARS (out of 5) strong buy ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $50 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 7.5% return in just three weeks as long as JNJ is above $50 at December expiration. Johnson & Johnson would have to fall by more than 11% before we would start to lose money. Learn more about this type of trade here.

JNJ hasn't been below $52 at all in the past year and has shown support around $56 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MNT. He does control a bullish hedged position in JNJ.

Johnson & Johnson (NYSE: JNJ) will purchase Mentor (NYSE: MNT) for $31 per share. MNT, a supplier of medical products closed at $16.15 Friday. MNT December option implied volatility of 92 is above its 26-week average of 55 according to Track Data, suggesting larger price movement.

JNJ is recently trading at $58.24 in pre-open trading, below its close of $58.58. JNJ says: "the transaction is expected to have a dilutive impact to JNJ 2009 earnings per share of approximately $0.03 - $ $0.05." JNJ December option implied volatility of 41 is above its 26-week average of 25 according to Track Data, suggesting larger price movement.

UnitedHealth (NYSE: UNH) closed at $21.01 Friday. UNH affirmed its previous outlook for 2008 net earnings of $2.95 to $2.98 per share. UNH rolled out www.myoptumhealth.com for general public, the initiative will compete with WebMd, Mayo Clinic Revolution Health & other health-information portals. UNH December option implied volatility of 92 is above its 26-week average of 59 according to Track Data, suggesting larger price movement.

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

For the most part, the Cadence Design Systems (NASDAQ: CDNS) unsolicited offer for Mentor Graphics (NASDAQ: MENT) was a smart move (both companies are leaders in semiconductor design software). This transaction would be a critical part of consolidation in the industry.

However, on Friday, Cadence decided to drop its $1.6 billion bid. As a result, the shares of Mentor plunged 25%.

What happened here? Well, according to Cadence, it looks like the board of Mentor didn't want to open its books (although, Mentor disputes this). Another issue is antitrust. Oh, and with the credit crunch, it's still pretty tough getting financing.

Perhaps the big problem is the slowing economy, which is putting pressure on the semiconductor industry. After all, Cadence posted weak Q2 results, and the outlook looks dismal.

Whatever the reasons, Wall Street likes the result. On the news, Cadence's share increased 6.7%.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

MOST NOTEWORTHY: PSS World Medical (PSSI), Rockwell (ROK), Open Text (OTEX), Sanderson Farms (SAFM) and Mentor (MNT) were today's noteworthy upgrades:

• PSS World Medical (NASDAQ: PSSI) was upgraded to Outperform from Neutral at Robert W. Baird. Baird said the quarter was impacted by one-time items and that core operations remain strong while private label, home care and HCIT initiatives may contribute to substantial margin improvement.
  
• Friedman Billings added Rockwell Automation (NYSE: ROK) to its Top Picks list based on valuation and growth drivers.
  
• Merrill Lynch upped shares of Open Text Corporation (NASDAQ: OTEX) to Neutral from Sell. Kaufman Brothers upgraded shares of the stock to Buy from Hold with a $27 target to reflect the company's better-than-expected Q4 results.
• Sanderson Farms Inc (NASDAQ: SAFM) was upgraded to Strong Buy from Strong Sell on valuation and accelerating sales of the company's poultry products.
  
• The firm upgraded shares of Mentor Corporation (NYSE: MNT) to Buy from Sell given the company's good performance and low risk.

OTHER UPGRADES:

• Cache Inc (NASDAQ: CACH) was upgraded to Buy from Neutral with a $19 target at First Albany and to Outperform from Market Perform at Piper Jaffray.
  
• Gabelli upgraded shares of Diageo (NYSE: DEO) to Buy from Hold.
  
• RBC Capital Markets raised shares of Knology Inc (NASDAQ: KNOL) to Outperform from Sector Perform.
  
• Goldman Sachs upgraded shares of Maxygen Inc (NASDAQ: MAXY) to Neutral from Sell.

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

MOST NOTEWORTHY: Specialty pharmaceutical companies make up today's most noteworthy list:

• The Bank of America initiated Shire plc (NASDAQ: SHPGY), Mentor Corp (NYSE: MNT), Alcon, Inc (NYSE: ACL) and Allergan, Inc (NYSE: AGN) with Buy ratings and initiated Cephalon, Inc (NASDAQ: CEPH), Forest Laboratories, Inc (NYSE: FRX), Sepracor Inc (NASDAQ: SEPR) with Neutral ratings. Bank of America's top pick is Shire plc as the firm expects the company to launch six products or product extensions by mid-2008, followed by Mentor Corp, as the conversion to silicone breast implants should drive a period of stronger-than-expected sales and earnings.

OTHER INITIATIONS:

• Ford Motor Co (NYSE: F) was initiated at Buckingham with an Underperform rating and General Motors (GM) was started with a Neutral rating.

• Nollenberger believes Under Armour, Inc (NYSE: UA), started with a Buy rating, is positioned to outperform the market based on the strength of its brand name and demand through the continued introduction of new products along with European growth.

• Barr Pharmaceuticals, Inc (NYSE: BRL) was initiated with an Equal Weight rating and $53 target at Morgan Stanley.

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