Analyst Upgrades

• Medicis (MRX) to overweight from neutral at Piper Jaffray, to outperform from market perform at Bernstein, to outperform from sector perform at RBC Capital and to overweight from neutral at JPMorgan.
• Wellpoint (WLP) to buy from neutral at Davenport.
• Humana (HUM) to buy from hold at Jefferies.
• Frontier Oil (FTO) to equal weight from underweight and Resources Connection (RECN) to overweight from equal weight at Barclays.

On Monday, Standpoint Research initiated a Buy rating on shares of retailer True Religion Apparel (TRLG). The stock soared more than 6% on the bullish outlook. It closed at $22.07 Tuesday. Given Standpoint's $33 price target -- a potential 58% return from last Friday's closing price -- the move may have been more than justified.

The tide appears to be turning in on TRLG. The stock is down a little less than 20% on the six-month chart, but it has risen more than 14% over the last five trading days, and seems poised to continue its ascent Wednesday. Money is clearly pouring into this name and the retail sector as a whole is heating up.

Option traders appear to be setting up for a bullish move on Cypress Bioscience, Inc. (CYPB). Traders plowed into 1,305 new call option contracts -- 19.19 times the average volume -- on the stock on Friday. And we know that traders were eager to get into this trade because 100% of the trades came in on the ask price.

Cypress has been in a downtrend since hitting a high around $10.00 in July 2009. The stock closed Friday at $3.39, down 10.79% during the past month.

The Wall Street Journal reports (subscription required) that "As part of a joint promotion between Gap Stores Inc. (NYSE: GPS) and the Big Board, traders will be outfitted with 1969 Premium Jeans from the retailer. Gap executives will ring the closing bell Friday, remotely from the company's San Francisco headquarters."

That's right: jeans of the floor of the New York Stock Exchange. It's part of Gap's effort to revitalize its image by offering more premium quality jeans -- at better prices than market leaders like True Religion (NASDAQ: TRLG) and 7 for All Mankind.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Bidz.com Inc. (NASDAQ: BIDZ) Q4 earnings release included notice about an SEC investigation.
• Dell Inc. (NASDAQ: DELL) saw net income drop by almost 50%, falling short of estimates.
• Ducommun Inc. (NYSE: DCO) received an analyst's downgrade after its Q4 earnings release.
• Gap Inc. (NYSE: GPS) said Q4 earnings fell due to weakness at Gap and Old Navy stores.
• General Motors Corp. (NYSE: GM) worse-than-expected results prompted speculation about its survival.

My boss at WeSeed.com has a favorite stock - True Religion Apparel Inc. (NASDAQ: TRLG), designer of jeans in the $200 - $300 range. On one hand, who has three hundred clams to spend on denim these days? On the other, people who always had such money for frivolities may have not been hurt as much as those always wearing discount threads. Plus, the TRLG store here in Chicago is always crowded, and people are buying.

Well, the fashion-conscience company reported fourth-quarter earnings last night, and while people may still be buying, the continuation of this trend is suspect. In its last reporting period, TRLG earned $12.7 million, or 53 cents per share, easily exceeding analysts' estimates of 46 cents per share. This topped year-ago results of 37 cents per share by 43%. Net sales more than doubled, surging to $24.4 million.

The Wall Street Journal reports (subscription required) that Levi Strauss will debut its new "Levi's Engineered Garments" label next week, beginning with four Bloomingdales stores. The line is a collaboration with Engineered Garments, a New York label.

The line includes $235 button-fly 501 jeans, $235 hunting pants, and $185 Army shirts. The premium priced products are a step up from the company's recent Capital E effort, with prices ranging from $138-195.

But more importantly, it's a big step up from the more moderately priced (but still high quality) offerings that have been the company's bread and butter since 1853. I'm skeptical about Levi's ability to convince people to pay premium-denim prices for a brand with such a long history of more mainstream offerings, but the line's existence is indicative of at least one thing: the brass at at Levi Strauss Inc. views high-end denim as the future, and wants a piece.

If they're right about that -- especially in the current consumer environment -- it's bullish for True Religion Apparel (NASDAQ: TRLG), the top publicly-traded high-end jean company out there. I don't think Levi's poses much of a threat as far as market share and, if the pie continues to expand, True Religion should prosper.

I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically short-selling trader like me! But before I tell you the name of this stock that despite the obvious economic problems -- strong oil, weak housing and the dollar, mounting foreclosure, etc -- is sitting right near all-time highs, looking to break out, let's do a quick rundown of its competitors in the apparel retail space.

There's Polo Ralph Lauren Corp (NYSE: RL) and Lululemon Athletica (NASDAQ: LULU), which after substantial runups and crushing drops off their highs, have been trying to find their footing. Then there are steady downtrenders Under Armour Inc (NYSE: UA), American Eagle Outfitters (NYSE: AEO), Pacific Sunwear of California (NASDAQ: PSUN), Liz Claiborne Inc. (NYSE: LIZ) and Bebe Stores (NASDAQ: BEBE). And last but certainly not least, the stock-that's-gone-absolutely-nowhere-for-the-past-six-years-meaning-its-been-useless-for-both-longs-and-shorts The Gap Inc (NYSE: GPS).

When the current CEO of a $500 million company sells 3.2 million shares of stock -- more than half of his holdings -- it's bound to raise some eyebrows.

So give True Religion Apparel (NASDAQ: TRLG) for not trying to slip that one through. Instead, the company took the unusual step of issuing a press release announcing the sales by founder Jeffrey Lubbell before the filing of the Form 4 with the SEC. Of course, it couldn't help using the press release as an opportunity at spin. Take a look:

Mr. Lubell sold these shares for two purposes: first, to fulfill an obligation due under the marital dissolution agreement with his former wife; and second, to continue his financial, estate and tax planning.

So that explains it! Except how much of it was to settle the marital dissolution agreement (Us poor folk call it divorce...) and how much of it was for "financial, estate and tax planning"?

And more importantly, what exactly is "financial, estate and tax planning"? Or better yet, what stock sale wouldn't fall under the umbrella of financial planning? Might he have sold the shares to build a house made of gold, buy an island, or take a vacation in outer space? Of course the shares were sold for financial purposes! Any transaction involving money is financial.

This press release looks like a pretty desperate attempt at damage control. It'll be interesting to see how the market responds.

MOST NOTEWORTHY: RF Micro Devices, QLT Inc and Everest RE Group were today's noteworthy upgrades:

• Jefferies upgraded RF Micro (NASDAQ:RFMD) to Buy from Hold citing strong proprietary Asian channel checks. The firm believes RF Micro is past the worst of the inventory handset correction in Asia and that the MPG business is also recovering.
  
• RBC Capital said QLT Inc's (NASDAQ:QLTI) risk/reward has improved and expects divestment announcements to start in late Q2. The firm raised shares to Outperform from Sector Perform.
  
• Citigroup upgraded Everest RE (NYSE:RE) to Buy from Hold citing valuation, likely buybacks, the low risk of asbestos charges and the seasonal trade ahead.

OTHER UPGRADES:

• Merriman raised Level 3 Comm (NASDAQ:LVLT) to Neutral from Sell.
  
• Zions Bancorp (NASDAQ:ZION) was upgraded to Outperform from Neutral at Baird.
  
• True Religion (NASDAQ:TRLG) was raised at Morgan Keegan to Outperform from Market Perform.

An Associated Press piece looks at the balance fashion houses must strike in the pursuit of increasing sales: How to expand that target market without diluting the brand? It's a lot the challenges musicians face as they attempt to crossover without alienating their core fan base. Some succeed big time -- like Carlos Santana, Pavarotti, and Allison Krauss. Others fail in their crossover attempts and then find that their original fans aren't so quick to welcome them back.

Some industry observers are concerned that top designers have become all-too ubiquitous, licensing their names to cologne and other products outside of the company's traditional scope. And so they're losing their cache.

Is this a concern for shareholders of luxury couturiers like Coach (NYSE: COH)? With newer brands like True Religion (NASDAQ: TRLG) aggressively pursuing licensing deals, should we worry that the company will lose its reputation at a top maker of luxury denim, and better known for licensing its name to any tchotchke it can get a fee for?

When evaluating luxury apparel companies, take a very careful look at the company's efforts to protect its brands. Wall Street's push for quarterly revenue/earnings growth can make just about any new product look tempting to a management team motivated by stock options. But in the long-run, shareholders can only be rewarded if the brand image is managed effectively.

VF Corporation (NYSE: VFC) has made 2 big acquisitions. It spend $775 million to acquire 7 For All Mankind, a privately-held leader in the booming premium denim market, and another $110 million to acquire Lucy, a make of women's activewear.

The moves are consistent with the company's strategy of acquiring strong brands with high margins while divesting some of its lower margin labels. The company holds numerous household names in apparel, including Wrangler, Lee, North Face, and Nautica.

For investors, the 7 acquisition is a sign of industry faith in continued strength in the premium denim category, where $300 jeans are nothing out of the ordinary.

VF is paying about 2.5 times sales for 7, while fellow denim-leader True Religion (NASDAQ: TRLG) trades at about 3.35 times sales with a market cap of around $450 million. That company recently announced that it was concluding a review of strategic alternatives and would continue as a stand-alone company. I suspect that there was little interest on the part of prospective buyers.

The other premium denim play, which owns much, much less valuable brands, is Blue Holdings (NASDAQ: BLUE), the parent company of Antik Denim, Taverniti So Jeans, Yanuk and Faith Connexion. The stock trades at less than 1 times sales, but has a substantial debt load and it isn't profitable.

Investors should probably watch the premium denim industry from the sidelines for now.

This weekend's Wall Street Journal talks about one of the most interesting studies (originally reported in BusinessWeek) that I've come across in a long time:

David Yermack of New York University and Crocker Liu of Arizona State University studied 432 CEOs of S&P 500 companies at the end of 2004 and found that 12% of them lived in homes of at least 10,000 square feet or on at least 10 acres. In the subsequent year, the share prices of companies with megamansion CEOs lagged behind S&P 500 chief executives with smaller homes by 7%, on average .... The study also looked at the 23 CEOs in their sample who had bought houses after taking over the CEO job, and found that together the companies lagged behind the S&P by about 25% in the three years after the purchases. Still not convinced? CEO buyers of smaller homes, by comparison, beat the S&P average in that period by 22%.

Isn't this interesting? Here are a couple of the possible reasons for it:

• Executives take home the largest pay packages in years, where they sell a lot of stock or exercise a lot of options. Then, they use that money to buy a huge home. Insider selling is often used as an indicator of trouble at a company, so it wouldn't be surprising if the share prices lag in years after CEOs sell a lot of stock.
• Building an expensive home may be a sign that a once-driven executive is getting bored with work. And besides, who has time to manage things like cash flow and strategic vision when there's wallpaper to pick out, home theater packages to choose from, and a wine cellar to design? Being a CEO takes a lot of time and energy, and so does building a palace. Something's gotta give.