Analyst Upgrades

• Brinker (EAT) to buy from neutral at UBS.
• Starbucks (SBUX) to overweight from equal weight at Morgan Stanley.
• Paccar (PCAR) to overweight from neutral at JPMorgan.
• CA Technologies (CA) to outperform from perform at Oppenheimer.
• PPL Corp. (PPL) to overweight from equal weight at Barclays.
• ConocoPhillips (COP) to hold from sell at Citigroup.
• First Defiance (FDEF) to outperform from market perform at Keefe Bruyette.
• MasTec (MTZ) to outperform from neutral at Credit Suisse.
• Amdocs (DOX) to neutral from underperform at BofA/Merrill.

There are many financial industry stocks that some investors think could be good plays for a rebounding market, such as JPMorgan Chase & Co. (JPM), Goldman Sachs Group, Inc. (GS) and Morgan Stanley (MS).

But Hilary Kramer, editor of GameChangerStocks.com, says that if you can only buy one stock in this sector, it should be in shares of private equity firm Fortress Investment Group (FIG).

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

• Barnes & Noble Inc. (NYSE: BKS) swung to a Q3 loss as same-store sales fell, and it lowered its outlook.
• Corning Inc. (NYSE: GLW) forecast lower profits due to weaker glass sales but has a strong cash position.
• Fortress Investment Group (NYSE: FIG) swung to a Q3 loss as investors requested redemptions.
• Gap Inc. (NYSE: GPS) profit beat estimates despite the decline in sales, and it reaffirmed its outlook.
• HJ Heinz Co. (NYSE: HNZ) strong Q2 results topped expectations but didn't impress the market.
• Intuit Inc. (NASDAQ: INTU) reported solid results and offered modest growth for the next quarter.
• Limited Brands Inc. (NYSE: LTD) Q3 profits and same-store sales fell and it lowered its guidance.
• Macy's Inc. (NYSE: M) fell short of Q3 expectations and said it would reduce capital expenditures in 2009.
• Medtronic Inc. (NYSE: MDT) fell short of Q2 expectations and lowered its full-year guidance.
• PepsiCo Inc. (NYSE: PEP) reaffirmed its previously announced full-year earnings guidance.
• Salesforce.com Inc. (NYSE: CRM) said Q3 earnings and revenue grew sharply, beating expectations.
• Target Corp. (NYSE: TGT) posted weak Q3 numbers and discontinued its share buyback activity.
• Walt Disney Co. (NYSE: DIS) was downgraded on the belief that consensus estimates may be too high.

Analyst upgrades:

• PepsiCo (NYSE: PEP) was upgraded to Buy from Hold at Deutsche Bank.
• Fortress (NYSE: FIG) was upgraded at Citigroup to Hold from Sell.
• Prudential (NYSE: PUK) was lifted to Overweight from Neutral at JP Morgan.
• Keefe Bruyette upgraded Franklin Resources (NYSE: BEN) to Outperform from Market Perform and added shares to their Best Ideas List on valuation as they see an attractive risk/reward at current levels.
• UBS upgraded ASML Holding (NASDAQ: ASML) to Buy from Neutral on valuation as they believe the company remains a market leader.
• Oppenheimer raised Seattle Genetics (NASDAQ: SGEN) to Outperform from Perform on valuation following the recent weakness as they expect positive clinical news flow beginning in December.

Analyst downgrades:

• UBS downgraded U.S. Steel (NYSE: X) to Sell from Buy and lowered its target to $30 from $60 citing deteriorating U.S. conditions and concerns about the company's high fixed costs in a falling steel price environment.
• Royal Dutch Shell (NYSE: RDS.A) was downgraded to Underperform from Neutral at Credit Suisse.
  
• China Unicom (NYSE: CHU) was lowered to Underweight from Neutral at JP Morgan.

TheStreet.com's Jim Cramer says as long as there are other buyers of the paper, look for other similar deals.

Merrill's (NYSE: MER) (Cramer's Take) deal with Lone Star gives the first real stab of the private market value of this paper, 22 cents on the dollar. But when you add in the financing you can argue that it is about half that.

Why so low? Because even after a year and a half of stress, we still can't publicly value this stuff.

Remember the deal with Lone Star is a private one, where the investors have to wait five years for the paper to mature. We don't really know what a CDO is worth, you just know what they may have paid.

This is despite the fact that for years now, this stuff has existed, no one has come out and said "this CDO has a lot of Florida, so it is bad," or "this piece of paper has a 90% default rate," or "this debt is hindered by bad HELOC."

Without that info, we can't price it. Lone Star knows more than most, but basically had to put up very little. In this deal, Merrill said "here, we will pay you to take these off our hands."

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

• AAR Corp. (NYSE: AIR) posted record third-quarter earnings and revenue.
• Adobe Systems Inc. (NASDAQ: ADBE) posted better-than-estimated first-quarter results and raised its outlook.
• CKE Restaurants Inc. (NYSE: CKR) posted third-quarter results that missed estimates.
• ConAgra Foods Inc. (NYSE: CAG) third-quarter profit surged as strong sales offset commodity prices.
• Darden Restaurants Inc. (NYSE: DRI) beat third-quarter expectations and offered guidance.
• FactSet Research Systems Inc. (NYSE: FDS) second-quarter results beat estimates and it raised its outlook.
• Fortress Investment Group (NYSE: FIG) remained upbeat despite a fourth-quarter loss.
• Guess Inc. (NYSE: GES) record fourth-quarter results beat Wall Street expectations.
• Inter Parfums Inc. (NASDAQ: IPAR) posted better-than-estimated fourth-quarter results and raised its outlook.
• Jabil Circuit Inc. (NYSE: JBL) beat second-quarter expectations but lowered its guidance.
• JC Penney Co. Inc. (NYSE: JCP) lowered its first-quarter outlook on weaker-than-expected sales.
• KB Home (NYSE: KBH) swung to a larger-than-expected first-quarter loss on write-downs.
• Lennar Corp. (NYSE: LEN) posted a smaller-than-expected first-quarter loss.
• Monsanto Co. (NYSE: MON) raised its second-quarter and full-year guidance.
• Oracle Corp. (NASDAQ: ORCL) merely met earnings expectations, sending shares lower.
• Tiffany & Co. (NYSE: TIF) posted better-than-estimated fourth-quarter results and raised its outlook.
• Usana Health Sciences Inc. (NASDAQ: USNA) posted lower-than-expected first-quarter results.
• Walgreen Co. (NYSE: WAG) posted solid second-quarter results, including same-store sales growth.

Also, auction-rate securities issues may hurt some tech company results. Analysts keep cutting earings estimates for the big banks, but some are eyeing Yum! Brands (NYSE: YUM) earnings prospects as it expands in China, as well as Archer Daniels Midland (NYSE: ADM) on soaring demand for commodities.

Upcoming results to watch for include Best Buy (NYSE: BBY), Monsanto (NYSE: MON), and Research in Motion (NASDAQ: RIMM).

Visit AOL Money & Finance for more earnings coverage.

We now own Newcastle Investment Corp. (NYSE: NCT), a CMBS lender and REIT paying about a 26% yield in several portfolios. It does not own real estate, instead it holds loans on nonresidential properties.

NCT is on record to fully fund its dividend and anticipates one billion dollars in loans to be paid off in the coming year. It is one of my 8 for 2008. See original full story: Chasing Value: Newcastle's 22% yield will reward patience.

The stock has lost two thirds of its value from its 52-week high and closed at $11.08 yesterday down further from my initial buy-in. The stock is down because of investors fears about the real estate values supporting the loans and the resemblance to residential mortgage brokers and lenders that have collapsed or suffered great losses. Neither of these issues are of concern to me. I am active in the commercial real estate markets and we have not seen appreciable reductions in the value of existing commercial and industrial property.

Last Wednesday, the mega hedge fund Och-Ziff went public. But investors were jittery and the stock has already dropped 12.5% since its debut.

Well, it may drop even more -- that is, according to a piece in Barron's [a paid service]. In fact, the author, Andrew Bary, calls the company's investment performance an example of "mediocrity."

The current market value of Och-Ziff is about $10.8 billion, which means it is trading at about 18 times earnings. So, on its face, this seems reasonable, right?

Well, you need to make some adjustments. First of all, there is the favorable tax treatment (which may undergo some changes in Congress).

Next, Och-Ziff relies primarily on hefty fees for its investment performance. But, what if the firm has a down year? It could be a big hit to the bottom line.

Alternative investment asset manager Fortress Investment Group's (NYSE: FIG) decision to shutter its subprime mortgage division, Nationstar Mortgage, generated only a mild reaction from traders and analysts alike. Nationstar, a leading U.S. subprime lender, has sustained substantial losses due to rising defaults and foreclosures.

Nationstar said any approved mortgage applications in its pipeline would be honored. Nationstar will also continue to service the $10 billion in subprime loans in its portfolio.

Wall Street took Fortress's subprime decision in stride: Wall Street appreciates all the candor and data it can get regarding the status of subprime loans and operations, and Fortress's announcement will help analysts compose a more-complete report on Fortress, one reason the Street did not punish FIG's shares this week. On Friday, FIG's shares closed down 26 cents to $21.32.

Moreover, Wall Street's clamor for "the more data, the better" regarding the subprime sector is not without justification. Late payments and defaults on subprime mortgages are already four times the historical U.S. average, and many analysts expect that percentage to rise in the quarters ahead: about $350 billion in subprime home loans will shift to higher interest rates, with initial rate increases boosting costs by 30% or more, according to research by Credit Suisse (NYSE: CS).

Nationstar, formerly Centex Home Equity, was bought in 2006 by Fortress, a manager of private-equity and hedge funds, for about $554 million. It had been owned by Dallas-based Centex (NYSE: CTX), the fourth-biggest U.S. homebuilder.

Since its IPO in March, the shares of private equity firm Fortress
Investment Group LLC (NYSE: FIG) have plunged from $33 to $18
But, the team is trying to reverse things. In fact, this week Fortress filed an IPO for one of its portfolio holdings: Seacastle.

Basically, the company is one of the largest lessors of intermodal equipment (such as chassis, containers, and containerships). It's an important business because it allows for multiple transportation modes like ships, rail, and trucks.

In fact, according to a report from Clarkson Research, the containerized market should grow at about 10% per year (through 2008). Key drivers include: lower trade barriers, the growth of manufacturing in areas like China and India, and strong global economic activity.

Because of the long-term lease arrangements, the cash flows are fairly predictable. Last year, revenues were about $138.4 million and net income was $3.6 million.

The underwriters include Citigroup Inc. (NYSE: C), Bear Stearns Cos.(NYSE: BSC), Deutsche Bank AG (NYSE: DB), and Merrill Lynch & Co. (NYSE: MER). The proposed ticker is "SC."

You can find the prospectus at the SEC website. Also, if you want to check out more IPO filings, click here.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

David Rubenstein, who is the co-founder of private equity firm The Carlyle Group, has been buying and selling companies since 1987. Now his firm has 30 offices around the globe, as well as $71 billion under management.

Interestingly enough, back in the 1970s, he served in a variety of political seats -- such as the Deputy Assistant to the President for Domestic Policy (under the Carter Administration). He has also practiced law for several prestigious law firms.

So what are his thoughts on the recent turmoil in the private equity world? Well, he gave an interview for the Wall Street Journal [a paid publication]. Basically, his opinions are in-line with those of other top dealmakers, such as from the Blackstone Group (NYSE: BX) and Fortress (NYSE: FIG). That is, we won't see mega deals (because financing has vaporized).

Also, sellers will need to get more realistic on valuations, which is never easy. In fact, many just may rather wait to do deals. In other words, private equity firms will need to work much harder to get strong returns -- and it will require more patience (Rubenstein thinks this could take a couple years).

By the way, Rubenstein has a new book that will hit the shelves soon: Beyond Wall Street: The Rise of Private Equity and the Future of Investing. It should be a good read.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

It's been a lonely place at BloggingBuyouts lately. There's been a few deals – but no mega deals. And, of course, there's lots of buzz about troubled deals, such as Home Depot's (NYSE: HD) attempted sale of its wholesale business.

Unfortunately, according to a recent piece in Reuters, it looks like the loneliness will continue for the rest of the year -- if not through a good part of 2008.

Basically, there is about $330 billion in debt to get placed – which is not easy when the financial system is in the midst of a credit crunch. In fact, on conference calls from firms like Blackstone (NYSE: BX) and Fortress (NYSE: FIG), the message is that dealmaking is in the freezer.

If anything, private equity firms are probably going to do smaller deals – or buy up discounted debt or other securities.

Of course, this is very bad news for the investment banks, which have been addicted to fees generated from LBO deals.

Although, I think these firms will try focus on other things, such as IPOs (which have lucrative fees) and also try to drum up M&A deals among strategic parties. But, there are limits here too.

In other words, I think Wall Street is going to be down-and-out for awhile.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Everything's big in Texas. Look at the state's Teacher Retirement System (TRS). In all, it has about $112 billion in assets.

Interestingly enough, the pension fund wants to devote about a third of its assets to alternatives, such as hedge funds and private equity funds. This is according to a story in the Wall Street Journal [a paid service].

Yes, when you take a look a the SEC filings of the Blackstone Group (NYSE: BX), Fortress (NYSE: FIG), and KKR, you will see that alternative investment can post strong returns.

Despite this, the TRS strategy is certainly gutsy. Keep in mind that alternative investments can be fairly illiquid. What if it gets tougher to do IPOs or get sound exits on these investments?

Or, what if there is a meltdown, as seen with the subprime hedge funds at Bear Stearns (NYSE: BSC)?

Even the pros can make big blunders. And it could be bad news for pensioners.

On the other hand, TRS's move is certainly good news for the private equity world. Simply put, there's likely to be many more assets under management -- and that means lots of juicy fees.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

MOST NOTEWORTHY: Genesit Energy LP (GEL), EnerNoc (ENOC) and Comcast (CMCSA) were today's noteworthy initiations:

• Genesis Energy (AMEX: GEL) was initiated with a Buy rating and $40 target at Stanford, as the firm believes the company's affiliation with Denbury Resources and pending acquisition of petroleum products, terminals, and transportation businesses from the Davison family will drive rapid growth.

• EnerNoc Inc (NASDAQ: ENOC) was initiated with a Hold rating and $42 target at Jefferies, due to valuation. EnerNoc was also initiated at Morgan Stanley with an Equal Weight rating and $40 target.

• Stifel expects Comcast (OTC: CMCSA) to benefit from higher penetration levels of DVR and HDTV set-top boxes over the next several years and initiated shares with a Buy rating and $34 target.

OTHER INITIATIONS:

• Select asset managers were initiated at Credit Suisse:

• AllianceBernstein (NYSE: AB), Affiliated Managers (NYSE: AMG), Fortress Investment (NYSE: FIG), Invesco (NYSE: IVZ), Franklin Resources (NYSE: BEN) and T Rowe Price (NASDAQ: TROW) were initiated with Outperform ratings.

• Blackrock (NYSE: BLK), Calamos Asset Mgmt (NADAQ: CLMS), Eaton Vance Corp (NYSE: EV), Federated Investors (NYSE: FII), Janus Capital (NYSE: JNS), Legg Mason Inc (NYSE: LM) and Waddell & Reed (NYSE: WDR) were initiated with Neutral ratings.

• Deutsche Bank initiated Ryland Group (NYSE: RYL) with a Buy rating and $52 target, as well as Pulte Homes (NYSE: PHM) and Meritage Homes Corp (NYSE: MTH) with Hold ratings and a $23 target and $29 target, respectively.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MAJOR PAPERS:

• Vonage Holdings Corp (NYSE: VG) said bankruptcy is one of the potential risks from its continuing patent litigation with phone giant Verizon Communications Inc (NYSE: VZ), reported the Wall Street Journal.
• Blackstone Group is selling Extended Stay Hotels to Lightstone Group for $8B, which beat offers from Fortress Investment Group (NYSE: FIG) and Goldman Sachs Group Inc (NYSE: GS), according to the Wall Street Journal.
• The Wall Street Journal reported that other financial firms such as Countrywide Financial Corporation (NYSE: CFC), CIT Group Inc (NYSE: CIT), iStar Financial (NYSE: SFI), and KeyCorp (NYSE: KEY) may be in play after the sale of Sallie Mae (NYSE: SLM).

OTHER PAPERS:

• The Telegraph reported that General Electric Company (NYSE: GE) is looking to sell a natural gas power plant in the UK for an estimated GBP450M-GBP500M, with potential buyers including E.ON AG ADS (NYSE: EON) and Scottish Power ADS (NYSE: SPI).
• The New York Post has learned that Heather Pech, a senior Jones Apparel Group Inc (NYSE: JNY) executive that headed the Nine West retail chain, has left the company.

WEBSITES:

• WNBC.com reported that Research in Motion Limited's (NASDAQ: RIMM) Blackberry service is suffering a massive system failure since last night.