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.

This post was written by Minyanville contributor Sean Udall.

Through my career I've generally stayed apolitical with regard to investment and trading decisions, but there have been times when some higher percentage trades have presented themselves due to political circumstances. Examples include: the tech push in Clinton's second term, the defense sector after Bush's 2000 victory, as well as the oil patch. Based on that, here are some overriding thoughts, in no particular order.

The market has moved to the phase where many if not most participants want and expect a pullback. Since the market confounds the greatest number of players most of the time, is a big pullback a lower probability event now? Moreover, does the selling panic of much of October turn into a buying panic in the coming weeks and months? I'm letting the charts lead me here but aware that this bullish case could possibly trump terrible economic conditions.

I still think the alt energy patch (solar, wind, battery tech, clean coal) will produce some of the best winners, but a lot of easy money has been made in just days. Quality and fundamentals will likely count much more now than over the past few months. Also, extended runs may become vulnerable quickly if policy decisions do not show quick tangible follow-through. Companies with the best balance sheets and funding sources will benefit the most and have the least downside on sharp technical pullbacks.

Would you know that the Dell laptop computer -- and many other brands -- are made by Taiwanese contractors for some of the largest PC manufacturers in the world? Wistron (supplier to HP) and Quanta make almost all of the laptop computers sold worldwide by all the famous brands, so when the largest of these contractors -- Quanta -- says that it has had a record month in terms of shipments, one can definitely say that the PC market is not dead.

Quanta shipped a record 2 million notebook computers in January. Is the age of the desktop computer over and being replaced by legions of laptop computers? Or does this mean laptop computer systems are hitting that all-important point in the product lifecycle: the tip of the peak?

Quanta said that never before in its 19-year history had the company ever shipped more than 2 million units for one month. With the bulkier desktop systems being replaced more and more by consumers and even businesses by the portable laptop computer, expect Quanta's fortunes to go nowhere but up for now.

Although short selling -- the practice of selling borrowed shares with the hope of repaying the loan by buying back the shares at a lower price -- goes against the American belief that stocks always go up, I have long been fascinated with it. My plan for my new blog, Short Stories, is to discuss what works, what doesn't, and what some of the leading lights in shorting stocks think about its opportunities and threats. I will describe possible short trades and I'll seek your comments and questions for story ideas. I won't be offering any investment advice and I won't trade on any of the posts I write.

A company's assets are available to pay the claims of customers, lenders, and stockholders. But when those assets are dwindling relative to the claims, there's a chance that not all the constituents will be paid off in full. For example, lenders are usually ahead of preferred shareholders, both of whom get paid before the common shareholders. In such cases, the common shareholders could be left with little or nothing.

This is the concept behind a trade that one of my Short Stories sources described to me last week. He sold short common shares of Quanta Capital Holdings Ltd. (NASDAQ: QNTA) when they traded at $2.50 and bought shares of Quanta Capital Holdings Ltd. -- Series A Preferred Shares (NASDAQ: QNTAP) when they went for $16.50.

Quanta is a Bermuda-based property/casualty reinsurance company founded in 2003. Translated into English, Quanta insures insurance companies that protect people and property against catastrophes. Thanks to the massive losses from hurricanes in 2004 and 2005, Quanta lost its claims-paying rating from A.M. Best, which it needs to write new policies. So now it's in run-off mode. That means it will keep operating until it fulfills its contractual responsibilities to previous policyholders but it won't write any new policies. Why would my source place such as bet on an insurance company in run-off?