Armstrong World Industries (AWI), first discussed here on November 8, 2010, at a price of $49.61, has meandered near $45 for the past three months, but I still like the shares at this stage. Here's why.

Armstrong, a leading producer of flooring products and ceiling systems for commercial, institutional, and residential buildings, should benefit from the bottoming-process in both the U.S. housing sector and commercial construction.

Analyst Upgrades

• Molycorp (MCP) to overweight from neutral at JPMorgan.
• Humana (HUM), HealthSpring (HS) and UnitedHealth (UNH) to buy from neutral at UBS.
• Williams Cos. (WMB) to conviction buy from neutral and UBS (UBS) to buy from neutral at Goldman.
• China Kanghui (KH) to overweight from neutral at Piper Jaffray.
• Arthur J. Gallagher (AJG) to buy from hold at Citigroup.
• Armstrong World (AWI) to buy from hold at BB&T.
• Time Warner (TWX) to buy from hold at Benchmark Co.
• Calpine (CPN) to overweight from equal weight at Barclays.
• 3M Company (MMM) to neutral from underperform and Kirby (KEX) to buy from underperform at BofA/Merrill.

Armstrong World Industries (AWI), first discussed here on November 8, 2010, at a price of $49.61, has pulled-back about 20% after a rise through key, psychological resistance at $50, but I still like the shares at this stage. Here's why:

Armstrong, a leading producer of flooring products and ceiling systems for commercial, institutional, and residential buildings, should benefit from the bottoming-process in both the U.S. housing sector and in commercial construction.

MAJOR PAPERS:

• According to people familiar with the matter, the New York Attorney General has sent subpoenas to Merrill Lynch & Co Inc (NYSE: MER), The Bear Stearns Companies Inc (NYSE: BSC) and Deutsche Bank AG (NYSE: DB). The Wall Street Journal reported the subpoenas are related to the "packaging and selling of debt tied to high-risk mortgages."
• The Financial Times' dealReporter said that Armstrong World Industries Inc (NYSE: AWI) is "leaning towards" selling assets in order to fund a buyback. The dealReporter is citing a buyside source and a source familiar with the situation.

• According to Bloomberg, close to twenty percent of the funds held by Orange County, California are SIVs that may face credit-rating cuts. These funds are similar to the ones that bankrupted the county in 1994.
• TechCrunch reported that Google Inc (NASDAQ: GOOG) has launched a new interface for Apple Inc's (NASDAQ: AAPL) iPhone.

MOST NOTEWORTHY:

• Oppenheimer initiated Armstrong, whom they consider a relatively undiscovered, asbestos-related post-bankruptcy company, with a Buy rating and $55 target. They believe Armstrong could aggressively deliver its already conservative balance sheet and ultimately repurchase shares.

• General Motors Corp (NYSE: GM) was reinstated at Morgan Stanley with an Equal-Weight rating.

• Cowen initiated Level 3 Communications Inc (NASDAQ: LVLT) with an Outperform rating.

MOST NOTEWORTHY:

• Motorola Inc (NYSE: MOT) was the sole notable initiation today. Shares of the cellphone giant were resumed at Goldman Sachs with a Neutral rating and $18 target.

• Penn Virginia GP Holdings L.P.(NYSE: PVG) was initiated by AG Edwards with a Buy and RBC Capital Markets with an Outperform.

• Stifel initiated Armstrong World Indus (NYSE: AWI) with a Buy rating; the firm expects a sale of the 65.5% control block of stock owned by the Asbestos Trust to a strategic buyer or private equity firm. The firm believes the company can be valued in the $55-$60 range in a buyout.