Analyst upgrades:

• FBR Capital upgraded CapitalSource (NYSE: CSE) to Outperform from Market Perform on valuation as it sees an attractive risk/reward at current levels. The firm raised its target on shares to $5 from $3.
• Kaufman Bros. upgraded The Knot (NASDAQ: KNOT) to Buy from Hold following the company's Q2 results to reflect stable national advertising and a better bottom-line outlook. The firm raised its target on shares to $11 from $8.50.
• Baird upgraded Obagi Medical (NASDAQ: OMPI) to Outperform from Neutral and raised its target to $10 from $7 following the strong Q2 report. The firm believes business bottomed in Q1 and the outlook is improving.
• IPC The Hospitalist Co. (NASDAQ: IPCM) was upgraded to Overweight from Equal Weight at Stephens.
• King Pharma (NYSE: KG) was upgraded at BofA/Merrill to Buy from Hold.
• Infinera (NASDAQ: INFN) was upgraded to Hold from Underperform at Jefferies.

Analyst upgrades:

• Oppenheimer upgraded Amdocs (NYSE: DOX) to Outperform from Perform on expectations the company is gaining momentum following recent contract wins. The firm set a $27 price target on the stock.
• FBR Capital upgraded Starwood Hotels (NYSE: HOT) to Market Perform from Underperform after raising the Lodging sector to Overweight from Neutral. The firm cites improving demand data, potential foreign exchange benefits, and continued asset sales for the upgrade and raised its target price on Starwood to $19 from $14.
• BofA/Merrill upgraded Goldman Sachs (NYSE: GS) to Buy from Neutral. The firm expects Goldman to beat Q2 estimates due favorable trading and underwriting conditions. The firm raised estimates and increased its price target to $175 from $144.
• Jefferies (NYSE: JEF) was upgraded to Neutral from Sell at Pali Capital.
• KB Home (NYSE: KBH) was upgraded to Outperform from Neutral at Credit Suisse.
• Ciena (NASDAQ: CIEN) was upgraded to Market Perform from Underperform at JMP Securities.

Last December, over 100 stocks were featured in our Top Picks for 2007 report. Now, at mid-year, we turn to the 20 advisors whose picks showed the strongest gains to get an update on their previous picks, as well as a new favorite stock for the second half of the year.

Mark Skousen, editor of Forecasts & Strategies and host of the July 4th investor think tank FreedomFest, chose Aluminum Corp. of China (NYSE: ACH) as his favorite stock for 2007, which rose 45% as of 6/1/07. Here is his original recommendation on ACH and his current opinion on the stock.

For his new top pick, the advisor recommends Volcano Corp. (NASDAQ: VOLC). The advisor explains, "This is a medical technology company that is currently experiencing blockbuster revenue growth.

"Volcano provides a unique service in the burgeoning health care industry: an intravascular ultrasound and functional measurement product that visualizes the heart, brain, arteries, and other parts of the body to diagnose and treat heart disease, strokes, and other ailments.

"According to scientists and technicians worldwide, Volcano has the far superior technology than other competitors. I suspect that means a takeover in the future. Sales, which have raced past $100 million over the last twelve months, are growing at 48% per quarter. Earnings, too, have blown past analysts' estimates.

"I think this trend will continue for this stock. It could even become a buyout candidate. The stock has already started to move up. I recommend you buy Volcano now, before it erupts."

• The Wall Street Journal's (subscription required) "Heard on the Street" column focused on companies that would be hurt the most by the price of oil continuing to fall. The article mentioned Hess Corp (NYSE: HES) and Suncor Energy (NYSE: SU), along with alternative energy companies Aventine Renewable Energy Holdings (NYSE: AVR), Pacific Ethanol (NASDAQ: PEIX) and VeraSun Energy (NYSE: VSE).

• French newspaper Les Echoes reported that United Parcel Service (NYSE: UPS) may cancel its order for 10 Airbus A380s, which could create an opportunity for Boeing (NYSE: BA).
• Light Reading reported that Tellab's (NASDAQ: TLAB) CTO Thomas Gruenwald will leave the company at the end of this week.
  
• Investor's Business Daily's "New America" column mentioned BMC Software (NYSE: BMC) positively.
• BusinessWeek's "Inside Wall Street" column mentioned Volcano (NASDAQ: VOLC), UCBH Holdings (NASDAQ: UCBH) and US Airways Group (NYSE: LCC) positively.