Analyst upgrades:

• Kaufman Bros. upgraded American Superconductor (NASDAQ: AMSC) to Buy from Hold as it believes the follow-on contract from Sinovel has positive implications. The firm has a $36 price target on shares.
• Goldman upgraded Nike (NYSE: NKE) to Buy from Neutral citing valuation, visible long-term growth, and signs of sales stabilization. The firm has a $75 target on shares.
• Deutsche Bank upgraded Huntington Bancshares (NASDAQ: HBAN) to Buy from Hold on valuation following the recent underperformance. The firm raised its target on shares to $5.50 from $4.
• Novartis (NYSE: NVS) was upgraded to Buy from Hold at Citigroup.
• eHealth (NASDAQ: EHTH) was upgraded to Buy from Accumulate at ThinkEquity.
• China Precision Steel (NASDAQ: CPSL) was upgraded to Hold from Sell at Roth Capital.

• Jefferies upgraded VMware (NYSE: VMW) to Hold from Underperform on expectations June quarter revenue will be inline-to-slightly-better and negative revisions to September quarter revenue will not be as great as in the most recent two quarters. The firm raised its target on shares to $25 from $20.
  
• Citigroup upgraded Blue Nile (NASDAQ: NILE) to Buy from Hold on valuation following the recent pullback and believes expectations for Q2 are reasonable. The firm has a $50 price target on the stock.
  
• FBR Capital upgraded Bronco Drilling (NASDAQ: BRNC) to Market Perform from Underperform on valuation as it believes negative sentiment will ease. The firm raised its target on shares to $4 from $3.
• Unilever (NYSE: UL) was upgraded to Overweight from Neutral at JP Morgan.
  
• Posco (NYSE: PKX) was upgraded to Overweight from Equal Weight at Morgan Stanley.
  
• Gol Linhas Aereas (NYSE: GOL) was upgraded to Buy from Underperform at BofA/Merrill.

This post was written by Minyanville contributor Minyan Peter.

I realize that these are very difficult times for financial services companies, but I learned a long time ago that the only route to progress is dealing with reality.

With that as background I would offer to any number of regional banks who reported earnings this week that the correct disclosure when writing off goodwill is not "This is a non-cash charge which should be ignored because it does not effect cash or regulatory capital" but "In hindsight we overpaid for an acquisition and based on lower forecast earnings from this business in the future, we need to write down most of the purchase price."

My core investment strategy of trading strong penny stocks (which earned me 197% last year) has clearly benefited from the overall market's strength of the past few days. While I'm looking at these following five names, I'm not rushing into them just yet. Each has a different story to tell:

Ferro Corp. (NYSE: FOE), a struggling industrial materials maker whose stock price has plummeted in the past six months from the $20s to $1, basically doubled to $2 after the company amended its financing agreement -- meaning its lenders gave it some breathing room.

Ohio-based regional bank Huntington Bancshares (NASDAQ: HBAN) reported today a series of drastic measures meant to reduce costs by $100 million in 2009. Huntington will cut 500 jobs, or about 4% of its workforce; freeze salaries at 2008 levels; eliminate executive and incentive awards for 2008; and discontinue the company's 401(k) match contribution.

"It is important that our customers and shareholders know that we are well-positioned to deal with this challenging environment," said Chairman, President and Chief Executive Officer Stephen Steinour in a statement. "Our liquidity position is strong."

I think it's fair to say that there's much trepidation about the earnings season that picks up steam this week. And for better or worse, numbers from the big financials have begun to roll in. Last week we saw profit sink for JPMorgan Chase (NYSE: JPM) and significant losses from Bank of American Corp. (NYSE: BAC), Citigroup Inc. (NYSE: C), and Deutsche Bank (NYSE: DB).

Analysts surveyed by Thomson Reuters expect Bank of New York Mellon Corp. (NYSE: BK) to be among those financials reporting fourth-quarter earnings growth this week. They anticipate that Bank of New York will post a profit of $0.70 per share, compared to $0.67 per share a year ago and $0.72 in the previous quarter. Revenue is expected come to $3.8 billion, about the same as it was a year ago. Bank of New York has fallen short of earnings estimates in two of the past five quarters, by as much as 11.1%. For the full year, analysts are looking for $2.78 per share (+5.8%) on $14.8 billion (+4.2%). The consensus recommendation of analysts is to buy BK, and the long-term EPS growth rate forecast is 10.7%. Shares are 48.7% lower than a year ago. Other financials expected to report quarterly earnings growth this week include SunTrust Banks Inc. (NYSE: STI) and M&T Bank Corp. (NYSE: MTB).

The year 2008 saw a slew of discount M & A (mergers and acquisitions) deals, most of them below book value. Among these were Wachovia and National City. Capital One Financial bought Chevy Chase Bank at .64 times book value.

If you look at the financial landscape for 2009, some names are already popping up for distressed sales, such as Citizens Republic Bancorp (NASDAQ:CRBC), Huntington Bancorp (NASDAQ:HBAN), Midwest South Financial (NASDAQ:TSFG) and Colonial Banc Group (NYSE:CNB).

It seems that we will see a continuation of the purging of bad bank assets in 2009. Banks use a practice of good/bad assets and move their worst assets to a separate company that absorbs the assets' future losses. Then the original bank emerges as a healthier, deleveraged institution.

All of this is taking place under the radar and it is difficult for investors and the public to know which banks are using this practice. When deleveraging becomes unmanageable, the federal government may need to step in and absorb a bank losses to avoid the bank's failure.

Do you believe the financials are a place to invest in 2009?

Who knows why the Treasury gives our money to some banks and not to others. That comes to mind when considering that we just gave $18 billion to 10 regional banks -- three of which are unprofitable. Why does this matter? Because giving taxpayer money to an unprofitable bank could be as good as flushing it away. I guess Treasury figures it can always get more where that came from, so why not?

Here are the lucky winners of the government bailout lottery that earned a profit and their pre-market stock price change:

• SunTrust (NYSE: STI): $540 million -4.6%
• Capital One Financial Corp. (NYSE: COF): $374 million -2.3%
• Northern Trust (NASDAQ: NTRS): $214 million -2.1%
• Regions Financial (NYSE: RF): $206 million -0.8%
• Huntington Bancshares (NASDAQ: HBAN): $115 million +6.1%
• Valley National Bancorp (NYSE: VLY): $41 million 0%
• City National (NYSE: CYN): $16.6 million 0%

And here are the three that lost money but still got taxpayer capital -- the amount of their latest loss is in parentheses: