MOST NOTEWORTHY: The Refining Sector, International Game Tech and Gilead Sciences were today's noteworthy downgrades:

• Bernstein downgraded the Refining Sector to Market Weight from Overweight based on the weakening earnings outlook for the group. The firm downgraded Sunoco (NYSE: SUN) and Tesoro (NYSE: TSO) to Market Perform from Outperform.
  
• Citigroup downgraded shares of International Game Tech (NYSE: IGT) to Hold from Buy following the company's lower than expected guidance and removed the stock from their Top Picks Live List. The firm lowered their target to $25 from $45. Shares were also downgraded at Oppenheimer to Perform from Outperform following the company's lower-than-expected results.
  
• Jefferies cut Gilead Sciences (NASDAQ: GILD) to Hold from Buy following the company's Q2 results as they see limited upside catalysts and a matured core HIV drug franchise. The firm maintains a $56 target. BMO Capital downgraded GILD to Market Perform from Outperform based on valuation, flattening HIV sales, Letairis growth below expectations, and increased R&D costs.

OTHER DOWNGRADES:

• Best Buy (NYSE: BBY) was downgraded at RBC Capital to Outperform from Top Pick.
  
• Goldman removed Coca-Cola (NYSE: KO) from the Conviction Buy List.
  
• Progressive (NYSE: PGR) was lowered to Neutral from Outperform at Credit Suisse.

RBC downgraded Best Buy (NYSE:BBY) to "outperform" from "top pick", according to Briefing.com. The news service also reports that JP Morgan upgraded United Airlines (NASDAQ:UAUA) to "overweight" from "underweight".

Coca Cola (NYSE:KO) removed from Goldman Sachs Conviction Buy List, according to 24/7 Wall St.. The financial site also reports that EBay (NASDAQ:EBAY) Cut to Neutral from Buy at Goldman Sachs.

Douglas A. McIntyre is an editor at 247wallst.com.

Best Buy (NYSE: BBY) shares are falling today after a retail analyst at research company RetailMetrics LLC noted that, despite moderately encouraging same-store sales in June, retailers could face challenges through the remainder of the year. Rebate checks helped retailers this month, he notes, but they only provided a "one-time bump." He added that the back-to-school season is going to be challenging for retailers, which could be bad news for BBY. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on JPM.

After hitting a one-year high of $53.90 in December, the stock has hit a new one-year low today. This morning, BBY opened at $40.01. So far today the stock has hit a low of $38.20 and a high of $40.06. As of 12:15, BBY is trading at $38.54, down 1.31 (-3.3%). The chart for BBY looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $47.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 an 8.7% return in ten weeks as long as BBY is below $47.50 at September expiration. Best Buy would have to rise by more than 22% before we would start to lose money. Learn more about this type of trade here.

BBY hasn't been above $47.50 since January and has shown resistance around $41 recently. This trade could be risky if the company's earnings (due out on 9/16) are a positive surprise, but even if that happens, this position could be protected by resistance BBY might find at its 200-day moving average, which is currently around $46 and falling.

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 BBY.

When Best Buy, Inc. (NYSE: BBY) decided to pick up the ZAGG (OTC: ZAGG) invisibleSHIELD product, gadget fans everywhere need to have cheered. After all, the ZAGG product, which I've used, is an invisible shield made of military-grade film that covers all exposed surfaces of thousands of portable electronics, saving them from harm, scratches and nicks. What's not to love? Instead of those bulky and hard to handle leather and rubber cases, just cover your beloved iPhone, BlackBerry or digital camera with some clear film and drop it all you want. Well, hopefully not.

Best Buy has a unique marketing opportunity here that it may not recognize yet. Portable electronics are where it is at. We all want to have our email, voice-mail, digital camera capability, text messaging and maybe even portable Internet access anywhere we go, at any time. This means portable gadgets. While most of them are designed to look and feel extremely nice, the rigors of abuse in the real world don't generally agree. That's where ZAGG's product comes in.

Best Buy needs to land a major web and possibly TV marketing campaign to show just how easily this product can protect their sensitive and loved personal portable electronics. Get customers into stores to buy or special order one and make sure they leave with a few peripheral purchases. Accessories generally don't get the general public excited, but this is one that should. Some retailer needs to take advantage of it.

Take it Private! is a series looking at one company each week that, in my opinion, has no reason for being public. To find these companies, I screen for the following:

• high insider ownership
• a history of solid profitability
• a paltry Price/Earnings and/or Price/Cash Flow multiple
• a stagnant stock price accompanied by low volume indicating a lack of interest in the stock.

My purpose in highlighting these companies? This screen can be a good way to find deep value stocks, especially companies that may be attractive to a strategic buyer, private equity firm or management-led buyout at a premium to the current share price. However these profiles should not be interpreted as a recommendation to buy a certain stock. Let's take a look at Rex Stores (NASDAQ: RSC), a stock that I've followed with interest since 2004. Rex Stores owns and operates 111 electronics retail stores in 34 states, a business that has struggled in the face of lower-priced competitors from Best Buy (NASDAQ: BBY) to Wal-Mart (NYSE: WMT)

MicrocapTrader made a compelling and difficult to refute argument about the stock's value in this post from April of 2007: "In any event, assigning a proper valuation to RSC's property brings its tangible book value up to ~ $15 per share without even considering its inventory, worth another $6 per share at its carrying value."

And then there's the ethanol.

Microsoft (NASDAQ: MSFT) wants to expand the reach of its vital Office suite of products. The software giant wants to utilize a subscription model for the collection of programs. The initiative will commence later this month at Circuit City (NYSE: CC) and it will eventually reach other retail stores. People will also eventually have the option of accessing the subscription product via computers such as ones made by Dell (NASDAQ: DELL). The cost is reported to be $70 for twelve months of Office access.

This is an interesting scheme. As the article points out, businesses might not bat an eye at subscribing to software applications, but for consumers, this is a different ballgame. Many of us, myself included, are so used to going down to a Best Buy (NYSE: BBY) to purchase a software package for a flat fee that paying yearly dues just seems like an alien concept. And I'd say this goes double for something as large and complex as the Office program. Microsoft believes that $70 on an annual basis will be perceived as cheap and will expose consumers who might normally either seek upgrades on a pirated basis or who would simply continue using older versions to regular approved updates. It is a large investment, after all, to upgrade to a new iteration of Office.

Microsoft would be wise to market the heck out of the subscription model for Office, taking full advantage of the inflationary environment we are currently in. If potential users can be convinced of the value proposition, then they could eventually become hooked on the promise of upgrades over time for the relatively economical price indicated. Checking around on the net, I notice that a lot of the negative comments about this idea center on the fact that there are already free alternatives out there to Office, such as applications offered by Google (NASDAQ: GOOG).

According to this Wall Street Journal (subscription required) piece, a member of the Circuit City Stores, Inc. (NYSE: CC) board has left the building. Lead outside director Mikael Salovaara resigned yesterday. Can you blame the guy?

No you can't. Circuit City doesn't have any sort of game plan at the moment, and it's sinking fast. The company's stock is priced at $2.31 as I write this. The goofy Blockbuster Inc. (NYSE: BBI) transaction is gone (for now, at least...there are reports saying that it could be resurrected at a later date, although I don't buy that it will happen at all). It isn't competing effectively against Best Buy Co., Inc. (NYSE: BBY) and Wal-Mart Stores, Inc. (NYSE: WMT). In short, Circuit City is a Titanic-like electronics retailer that doesn't know how to keep its ship from hitting icebergs.

So this resignation isn't surprising. Of course, is there any way to make money off the stock? I do believe there is downside to come on the share price, which would therefore imply that shorting it could work out. Alas, I wouldn't recommend it. You just know that some company and/or financial entity out there might come in at any point and make a bid, and the shares could skyrocket. Although the Blockbuster deal didn't make sense, it doesn't mean that there isn't some transaction scheme out there that would be logical. Circuit City is a stock merely to watch out of curiosity, it's not one to do anything about.

Disclosure: I don't own any company mentioned here; positions can change at any time.

Ever since Circuit City Stores (NYSE: CC) CEO Philip J. Schoonover sliced 3,400 sales people in March 2007 to save money, I have questioned the savvy of its management. That's because many of those fired sales people took their customers over to Best Buy (NYSE: BBY). As its stock lost 86% of its value, I was surprised that anyone would make a bid for it.

Yet Blockbuster (NYSE: BBI), the struggling video store chain, decided to buy. I don't know what got into Blockbuster's head to make it think that combining two struggling companies would make an agile competitor. The Richmond Times reports that it wanted to create a one-stop shop for movies, games, and electronic equipment. But that dream died when Blockbuster pulled its $1.3 billion offer after reviewing Circuit City's books.

Carl Icahn has said he would buy Circuit City. But it's losing money -- $164.8 million, or $1 a share, in its fiscal first quarter. This was $100 million more than its Q1 2007 loss. And Blockbuster's conclusion after a closer look at its financial statements does not bode well for Circuit City's future. Circuit City stock is down 7.8% in pre-market. Let's see whether any new bidders emerge.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Earlier this year, chic and expensive retailer Sharper Image was purchased by a chop shop of sorts. A mall store with $5,000 massage chairs and insanely expensive geek gifts just didn't cut it in an age of high gas prices and home foreclosures. So the company, which went bankrupt, had its brand bought by Hilco Organization and Gordon Brothers Group. And guess what? You may see the Sharper Image brand again at you local Best Buy, Inc. (NYSE: BBY) or Target Corp. (NYSE: TGT) store aisles soon.

The Sharper Image brand may soon be pasted onto vacuum cleaners or sunglasses on retail store shelves. As people tend to buy brands as much as actual products, the brand will probably end up being a good investment on the $49 million that was paid to purchase it after the bankruptcy. It's pretty sad that such negative publicity about a single product -- the Ionic Breeze air purifier -- led to Sharper Image's downfall, although I believe there were deeper problems at play. As in, people loved to look at (but not buy) fancy things with grossly inflated prices.

It appears now that we may yet again see the Sharper Image name on infomercials, web sites and catalogs, as well as on some retail shelves. With an expectation of Sharper Image brand sales hitting an annual pace of $1 billion -- up from 2007's $375 million -- it's pretty easy to see why the owners of the now-defunct brand want to revive it. Customers know the brand, they trust it and they would love to see it on their new vacuum cleaner robot.

Best Buy Inc.'s (NYSE: BBY) Chief Operating Officer made a pretty strong pledge this week. Brian Dunn suggested that the largest consumer electronics retailer in the U.S. would double its sales to $80 billion within five years. This has an eerie air about it, as it sounds much like Dell, Inc. (NASDAQ: DELL) then-CEO Kevin Rollins many years ago. While Dell's ambitious goal didn't really pan out nearly as nice, Best Buy has a much better proposition to get to its goal.

Dunn's announcement at the retailer's annual shareholder's meeting this week was backed up by the fact that Best Buy has already doubled in size from 2003 to 2008. Its sales went from $20 billion to $40 billion in that five-year period. Keep in mind that one of Best Buy's chief competitors, Circuit City Stores, Inc. (NYSE: CC), is basically on the ropes hanging on for dear life. Wal-Mart Stores, Inc. (NYSE: WMT) is Best Buy's largest competitor, but it doesn't carry near the breadth of actual consumer electronic products that Best Buy does. This positioning still leaves Best Buy free to navigate to $80 billion by 2013. But, doubling every five years is no easy task, and especially in the consumer spending environment we're in now.

What is fascinating is that Best Buy apparently controls only about 20% of the consumer electronics market, and about 30% of retail PC sales in the U.S. Combine those low numbers with Best Buy's very aggressive international expansion and partnerships and it's easy to see that $80 billion in annual sales is already being attacked. Will it get there? We'll be checking -- all the way to 2013.

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

• Best Buy Inc. (NYSE: BBY) beat Q1 estimates as consumers spent their government stimulus checks.
• Carnival Corp. (NYSE: CCL) posted better than-expected Q2 results but offered cautious Q3 guidance.
• Cyberonics Inc. (NASDAQ: CYBX) beat Q4 expectations and offered full-year guidance.
• FactSet Research Systems (NYSE: FDS) had better-than-expected Q3 results and 500 new subscribers.
• General Mills Inc. (NYSE: GIS) raised its full-year guidance, sending shares up near the 52-week high.
• Goldman Sachs Group Inc. (NYSE: GS) results beat the previous quarter and analysts' estimates.
• John Wiley & Sons Inc. (NYSE: JW.A) doubled its Q4 earnings due to an acquisition.
• Life Partners Holdings Inc. (NASDAQ: LPHI) lifted its Q1 outlook after "best quarter" in company history.
• Lindsay Corp. (NYSE: LNN) Q3 profits nearly doubled, but the share price plunged anyway.
• Meade Instruments Corp. (NASDAQ: MEAD) narrowed its full-year net loss due to restructuring.
• Pall Corp. (NYSE: PLL) beat Q1 expectations on sales growth that was broadly based across markets.
• Titan Machinery Inc. (NASDAQ: TITN) beat Q1 estimates on strong demand for agricultural equipment.
• Vermont Pure Holdings Ltd. (AMEX: VPS) posted strong Q2 results despite a bad debt write-off.
• Western Union Co. (NYSE: WU) said 2008 profits would beat estimates and announced share buyback.

More earnings highlights from this week: Morgan Stanley, FedEx, Ford, GE, Circuit City and others

It is safe to say that the past couple of years have been tough on shareholders of Circuit City (NYSE: CC), and today is no different as the company posted a large loss for its fiscal first quarter. Shares of the electronics retailer are down 7.5% after the company posted a loss of $1 a share for its most recent quarter.

The company stated that the main reason for its poor performance last quarter was weak sales performance in the company's established stores. This really should not come as a big surprise to us since we have been well aware of the company's faltering sales over the past couple of years. On the whole, same-store sales dropped by 11.3%, and continues to affirm the belief that Circuit City definitely has its work cut out for it if it ever wants to start regaining its lost market share.

The total loss on the quarter totaled $164.8 million, about triple the $54.6 million loss it recorded for the same period last year. I wish I could say that things are looking brighter down the road but that is just not the case, as the retailer is expected to post another large loss for its second quarter. Analysts had been expecting to see a loss of $143.4 million for the current quarter, but the company issued weaker guidance, stating that it expects to see a loss of somewhere between $170 and $185 million.

The Wall Street Journal reports that Best Buy (NASDAQ: BBY) is test piloting the sale of used video games at its Canadian stores, with an eye toward expanding the program into the United States. While the company says it's too early to say whether the plan will take off, Best Buy's head of international relations said on a conference call that "We're very, very, very hopeful that this will be another avenue of increasing our relationship with the consumer generally."

What a nice way of saying "making more money." The used game business carries substantially better margins than retailing new games, and the frequency of trade-ins reduces inventory costs. Right now the leader in used games is GameStop (NYSE: GME), but you have to think a big push from Best Buy could take some market share in this profitable category. Alternative GameStop's small size and more knowledgeable staff could make it more appealing to consumers than Best Buy -- the two stores have locations in many of the same malls.

Even after its recent price decline, GameStop investors should be taking a hard look at the durability of the company's competitive advantage. The company has so far done exceptionally well competing with big box retailers, a testament to tremendous management and a strong concept. But it's a battle that's likely to continue and, looking further into the future, you have to wonder whether higher-quality digital delivery of games could hurt the company.

Apple Inc. (NASDAQ: AAPL) shares are trading higher today after Best Buy (NYSE: BBY) reported a first-quarter profit that beat analyst expectations, saying that its expansion of AAPL in-store shops boosted revenue for the quarter. If you think that Apple 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 the stock.

After hitting a one-year low of $111.62 in August, the stock hit a one-year high of $202.96 in December. Apple opened this morning at $178.10. So far today the stock has hit a low of $177.41 and a high of $181.27. As of 12:15, AAPL is trading at $180.50, up $3.66 (2.0%). The chart for AAPL looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $115 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 6.4% return in just four months as long as AAPL is above $115 at October expiration. Apple would have to fall by more than 36% before we would start to lose money. Learn more about this type of trade here.

U.S. stock futures rose early Tuesday as the Street awaited earnings from Goldman Sachs that has tended to beat analyst estimates in the past. In light of the turmoil in financials, this would be a welcome treat. Also this morning, several economic reports are due about inflation, housing and industrial production. Given the Federal Reserve meeting next week, investors will keep a close watch on the inflation data.

On Monday, U.S. stocks ended mixed as investors continued to worry about the economy and watch oil carefully. Downgrades of several Dow industrials stocks such as Verizon, AT&T and GE, caused the index to finish the day 38 points, or 0.31%, lower while the S&P 500 ended up a fraction of a point, or 0.01%, and Nasdaq Composite added 20 points, or 0.83%, getting a boost from possible approval of satellite radio merger.

A busy morning full of economic readings is ahead of us:
At 8:30 a.m. EDT, May building permits and housing starts figures will be released. The recent declining trend is not expected to reverse course yet, despite some recent indication the housing market may begin to show a bottom. Both figures are estimated to drop further.
At the same time, a measure of inflation with prices at the wholesale level will be reported. May Producer Price Index is expected to rise 1%, while core PPI is expected to show an increase of 0.2% in May.
Then, at 9:15, May capacity utilization and industrial production numbers are also due out with the latter actually expected to show a slight growth in May.

These will all be material for the Federal Reserve decision next week. And while many are anticipating a rate hike, or a series of hikes starting in August, and have already priced these in, both the Wall Street Journal and the Financial Times this morning report that the Fed "mood" doesn't support a rate hike in August, and that the market has been overaggressive with its expectations of how soon and how many hikes the Fed will use to curb inflation. No doubt these reports have contributed to this morning's more bullish sentiment.