Is it ever OK to forget valuation? Yes -- if you have the right mindset.

Once I learned how companies were valued, and how to value companies, I found it increasingly difficult to trade stocks that I may have found interesting before. The idea behind investing is that the stock market offers you businesses at premiums and discounts to their values. Obviously, to make money, you try to purchase the stocks with the deepest discounts and wait for the market to realize their value. However, this certainly has its flaws -- namely, you might have valued the company incorrectly. If you have too much conviction in this valuation, you can stand to lose a lot of money.

Trading is different from investing because you don't look at a stock as a business -- you look at it is a "stock." This mindset has its benefits over investing -- primarily the fact that money management becomes much easier because you can quickly cut losses without guilt.

Prior to learning about the concepts of value investing, I would guiltlessly trade in and out of stocks based on which sector was hot, momentum in earnings, and even momentum in price. And I happened to do well, but when another commitment came up (school) I was forced to shift to a more long-term mindset.

Level 3 Communications Inc. (NASDAQ: LVLT) announced its acquisition of Servecast, an Irish broadband and mobile video provider for $45 million. In terms of the cost of this deal, I wouldn't think much of it. This clearly wasn't an acquisition meant to quickly bolster Level 3's financial figures, considering Servecast only had $5 million in sales in 2006. However, this acquisition should help LVLT in its battle against Akamai Technologies Inc. (NASDAQ: AKAM) in the web video space, even if it is not as significant as the Savvis acquisition. According to one analyst at a hedge fund I spoke to, although this acquisition is rather small in terms of size, he is "sure it will help" as the company becomes a more formidable competitor to AKAM. Anyone who has followed AKAM over the last two years realizes how lucrative the web video space is in today's "Web 2.0" age in which online video is becoming more prominent by the day.

But this isn't what all of you care about! You want investment ideas! While the stock isn't appealing to the deep value investor in me (low multiples, hopefully low debt, etc.), the stock is very interesting and I believe it has tremendous upside potential in the next year and a half as the company's acquisitions finally come to fruition and integration is completed.

Savvis Inc (NASDAQ: SVVS) announced transaction with Microsoft Corporation (NASDAQ: MSFT) yesterday is another clear sign that the datacenter business is here to stay.

Savvis announced that Microsoft would assume leases for 300,000 square feet of datacenter space in Santa Clara that Savvis controls, the heartland of Silicon Valley. In return, Savvis receives $200 million. Microsoft gets greater control of more datacenter space and Savvis gets rid of below-market-rate leases that were signed when the industry was in the dump.

We began blogging that investors should jump into Savvis in April 2006 when the stock was selling for $26. Today, the stock is at $50, just shy of 100% profit. The datacenter industry was a boom-bust posterchild sector for Internet 1.0. Many of these companies went into or flirted with bankruptcy.

However, while the two largest stand-alone datacenter companies, Savvis along with Equinix Inc (NASDAQ: EQIX), have done considerably well since we started blogging about their merits as investments over one year ago, these stocks are still underfollowed and underknown. The fundamentals of this industry continue to improve and the barriers to entry continue to expand.

Stay with both Savvis and Equinix, and if you do not own them, I'd suggest buying them and putting them away. These are difficult assets to build and maintain and companies such as Microsoft, Google Inc (NASDAQ: GOOG) and Level 3 Communications Inc (NASDAQ: LVLT) want to own more of them.

Typically, a growth stock is defined by rapid revenue and profit growth. Does this make commodity companies growth stocks? Revenue and profits are soaring, but the reality is volume growth for many commodities is unspectacular, with demand increasing in the low-to-mid single digits.

When Henry Ford came up with the Model T, most other automobile manufacturers would produce several hundred cars per year and charge several thousand dollars per car, according to Wall Street historian John Steele Gordon in this weekend's Barron's. In 1908, Ford made 10,607 Model Ts, selling them for $850 each. By utilizing the assembly line, Ford was able to drive down cost, which, in turn, permitted him to charge customers less. Lower prices meant more Americans could afford automobiles, translating into huge volume growth and massive economies of scale for Ford Motor and its part suppliers.

By 1916, Model Ts were being assembled in only 93 minutes and the price dropped to $360, according to Gordon. Ford Motor sold 730,041 Model Ts that year and had 50% global market share. Volume in the auto industry was no longer being defined by a few hundred but by hundreds of thousand if not a million cars produced each year.

What industries demonstrate these characteristics today? It is not the auto sector any longer, that's for sure. Wal-Mart Stores (NYSE: WMT) and Home Depot Inc (NYSE: HD) successfully played the economies-of-scale curve for decades. Semiconductors and technologies are still on this curve. Moore's Law is all about playing this strength.

Jim Cramer came out on STOP TRADING on CNBC and said, "Tech is roaring." He noted that this is where the money is today, and therefore that is where the trade is. Here are the tech stocks he commented on:

Level 3 Communications (NASDAQ: LVLT) is the trade for the growth of YouTube's 70% growth each week (that was one of his top picks for the year). He thinks Intel (NASDAQ: INTC) can go to to $27.00, NVIDIA (NASDAQ: NVDA) can go $7 higher, SanDisk (NASDAQ: SNDK) can go to $50, EMC (NYSE: EMC) is obviously headed to $20.00, and Ciena (NASDAQ: CIEN) looks good.

He did note these are all trades, not long-term plays yet. But, so much for "tech is dead until August" as he was maintaining before. Frankly, Level 3 is not a surprise as this was his top speculative stock pick for 2007. He's already been positive on NVIDIA as a speculative stock just recently. As for the rest of it, calling for the calendar as the true read year in and year out, is just not the right call. That's my opinion anyway.

Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in any of the companies he covers.

Level 3 Communications Inc (NASDAQ: LVLT) reported very solid results yesterday, however, the organic growth rate seemed to slip from its 24% target down to 17%. This led to the stock getting hit a bit by investors in yesterday's trading.

I would use this price weakness to buy the stock.

Supposedly, Level 3 walked away from weak pricing in the enterprise business, something it can now afford to do since its balance sheet is in much stronger shape. What is also a positive is that most of the restrictive loan covenant agreements on its debt are now gone, which means it can focus on profitability and not revenue generation, which was a covenant that drove business decisions in the past.

Level 3 also remains on the path to being free cash flow positive, which has proven a boon for communications stock prices previously.

The other positive for Level 3 is that video usage is ramping up but revenue has not as of yet. This means when video pricing takes hold, Level 3 revenue growth should accelerate considerably.

The dynamics of this business are two powerful to ignore. I'd use the price weakness to buy this stock and put away.

Stocks that have held up best during this correction are most likely showing us where investor conviction is the strongest.

For example, one area that has held up surprising well is the Internet Protocol transport sector. Companies like Level 3 Communications Inc (NASDAQ: LVLT), Global Crossing Ltd (NADSAQ: GLBC), and Time Warner Telecom Inc (NASDAQ: TWTC) have changed little in price.

In previous corrections, these IP transport stocks would get crushed. However, that is not the case anymore.

This is a sign to stay with these stock and add to your position as the broader market continues to correct. If investors aren't selling these stocks now, it most likely indicates confidence is building in this space.

Additionally, Expedia inc (NASDAQ: EXPE), the online travel giant, has also held up very well, changing little in price during this correction. The stock has traded all over the place in previous corrections. This is a sign that investor confidence is improving here also.

All four stocks mentioned in this blog have good unit volume growth, operate low-cost businesses and appear to have pricing power returning to their industry -- a good combination to make some good money.

MOST NOTEWORTHY: Amgen, Inc (AMGN), Secure Computing Corp (SCUR), Advanced Micro Devices (AMD) and Level 3 Communications (LVLT) were some of today's more notable downgrades:

• UBS downgraded shares of Amgen Inc (NASDAQ: AMGN) to Reduce from Neutral as the firm believes most Medicare carriers will drop reimbursement for Aranesp in certain types of anemia due to safety concerns.

• Goldman Sachs cut Secure Computing Corp (NASDAQ: SCUR) to Sell from Neutral, citing valuation.

• Thomas Weisel believes Advanced Micro Devices (NYSE: AMD) will have a difficult time regaining lost channel share from Intel (INTC) without additional price cuts, downgrading shares to Market Weight to Overweight.

• Buckingham cut Level 3 Communications (NASDAQ: LVLT) to Accumulate from Strong Buy on valuation.

OTHER DOWNGRADES:

• Deutsche Bank downgraded shares of Edison International (NYSE: EIX) to Hold from Buy.

• Wachovia downgraded shares of Countrywide Financial Corp (NYSE: CFC) to Underperform from Market Perform on concerns that subprime weakness has spread to other sectors of the residential mortgage market.

• Ferris Baker Watts downgraded shares of Comstock Homebuilding (NASDAQ: CHCI) to Hold from Buy to reflect the uncertainty regarding the company's lender relationships and homebuilding market outlook.

• Citigroup downgraded shares of StanCorp Financial Group (NYSE: SFG) to Hold from Buy on valuation and recommends swapping money into Assurant, Inc (AIZ).

• JP Morgan cut AngloGold Ashanti Ltd (NYSE: AU) to Underweight from Neutral.

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

MOST NOTEWORTHY: Level 3 Communications Inc (LVLT) and General Motors Corp (GM) were today's notable upgrades:

• Deutsche Bank raised Level 3 Communications Inc (NASDAQ: LVLT) to Hold from Sell with a $5.40 target based on the belief the company will meet 2007 expectations.

• General Motors Corp (NYSE: GM) was upgraded at Merrill Lynch to Buy from Sell based on increased confidence the company will leverage its liquidity and legacy assets, specifically its pension, to drive positive changes.

OTHER UPGRADES:

• MasterCard inc (NYSE: MA) was upgraded to Overweight from Neutral at JP Morgan on valuation.

• Prudential upgraded Brinker Int'l Inc (NYSE: EAT) to Overweight from Neutral.

• Following the company's strong Q4 report, Piper Jaffray upgraded shares of Shanda Interactive Entertainment Ltd ADS (NASDAQ: SNDA) to Outperform from Market Perform with a $29 target, citing improved fundamentals and increased confidence in the come-stay-play model, among other reasons.

• Dover Downs Gaming & Entertainment (NYSE: DDE) moved to Hold from Sell at Stifel Nicolaus, citing valuation.

• Prudential raised HealthNet Inc (NYSE: HNT) to Neutral from Underweight, with a $52 target.

• 3M Company (NYSE: MMM) was raised to Buy from Hold with an $86 target at Soleil Securities following last nights $7B buyback announcement, which the firm believes will act as a positive catalyst.

• Bear Stearns upgraded Applebee's Int'l Inc (NASDAQ: APPB) to Peer Perform from Underperform following the company's announcement that it hired a financial adviser to explore strategic alternatives.

• Credit Suisse upgraded Build-A-Bear Workshop (NYSE: BBW) to Outperform from Neutral, with a $37 target.

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

After Cisco Systems Inc's (NASDAQ: CSCO) outstanding results, we blogged that another way to play the huge growth in IP traffic was through pure IP service providers such as Level 3 Communications Inc (NASDAQ: LVLT), Global Crossing Limited (NASDAQ: GLBC) and Time Warner Telecom (NASDAQ: TWTC). That day, these stocks rallied big, especially Level 3.

Yesterday, Level 3 reported outstanding results but the stock gave back all the gains made on Wednesday. Why? The company said EBITDA would be down sequentially.

I would use yesterday's price weakness to get into this stock. Level 3 is going to spend a boat load of money in the first quarter to properly integrate Broadwing and the other companies it acquired during 2006. After that, operating results, along with the stock, should be off to the races again.

Sprint Nextel Corporation (NYSE: S) has been one disaster of a merger because it never bit the bullet and spent the money to properly integrate the two companies. Sprint, after years of poor performance, is finally going to do the ugly work. But it might be too late.

The strong underlying trends in Level 3's business are too powerful to ignore. The core IP communications business is growing 25% to 30% per year, its growth rate and operating margins are the best in the industry and it continues to attract better and better customers--the who's who of the Internet era. In addition, Level 3 will substantially improve the debt-to-EBITDA ratio by 2008.

Yesterday's sell off was an overreaction. I would use it as a buying opportunity.

Cisco Systems Inc's (NASDAQ: CSCO) quarter-after-quarter of strong results is due to its focus and domination in developing the best Internet Protocol (IP) networking technology. Are there other ways to invest in IP and profit? Look at the remaining pure IP service providers:

• Level 3 Communications (NASDAQ: LVLT)
• Time Warner Telecom Inc (NASDAQ: TWTC)
• Global Crossing Limited (NASDAQ: GLBC)
• Qwest Communications International Inc(NYSE: Q)

Level 3 still has the most bang for the buck. Also, do not forget about Qwest, which owns an old Baby Bell but also owns a sizable nationwide IP backbone.

Chambers mentioned a number of interesting statistics during Cisco's conference call. Cisco's optical business grew 40% and its sales to service providers jumped 20%. Chambers went as far as to say that there are signs in the enterprise space that look very much like that of the mid 1990s before technology stocks went through the roof.

If Chambers forecast proves to be correct, this most likely means a shortage of pure IP capacity could be on the horizon.

MOST NOTEWORTHY: Dell Inc (DELL) and Taiwan Semiconductor (TSM) were today's most notable upgrades:

• Dell Inc (NASDAQ: DELL) was upgraded to Outperform from Neutral at Credit Suisse, with a $28 target. The firm expects Dell to augment its existing technology with targeted acquisitions, reduce its cost structure and tweak its distribution philosophy.

• American Technology upgraded Taiwan Semiconductor Manufacturing Co ADS (NYSE: TSM) to Neutral From Sell.

OTHER UPGRADES:

• Level 3 Communications Inc (NASDAQ: LVLT) was upgraded to Market Perform from Sell at Janco; the firm doesn't recommend being short on the stock which is going into earnings on February 9th.

• Dominion Resources Inc (NYSE: D) was upgraded to Hold from Sell, with an $81 target, at Deutsche Bank.

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

MOST NOTEWORTHY: The Gaming sector and CBS Corp (CBS) were the most notable companies on today's initiation list.

• Prudential initiated the Gaming sector with a Favorable rating,
  
• They initiated Boyd Gaming Corp (NYSE: BYD), Town Sports International Holdings (NASDAQ: CLUB), Penn National Gaming (NASDAQ: PENN), Shuffle Master Inc (NASDAQ: SHFL), Steiner Leisure Ltd (NASDAQ: STNR) and Great Wolf Resorts Inc (NASDAQ: WOLF) with Outperform ratings.
  
• Ameristar Casinos Inc (NASDAQ: ASCA), MGM Mirage (NYSE: MGM) and WMS Industries Inc (NYSE: WMS) were initiated with Neutral ratings.
• Underweight ratings were given to International Game Tech (NYSE: IGT), Isle of Capri Casinos Inc (NASDAQ: ISLE), Life Time Fitness Inc (NYSE: LTM), Pinnacle Entertainment Inc (NYSE: PNK) and Trump Entertainment Resorts Inc (NASDAQ: TRMP).

• UBS initiated CBS Corp (NYSE: CBS) with a Buy rating and $38 target, citing valuation, dividends and buybacks.

OTHER INITIATIONS:

• Nollenberger believes International Rectifier Corp (NYSE: IRF) is the way to play the trend for energy efficiency, initiating the company with a Buy rating and $60 target.

• Goldman Sachs resumed coverage of AT&T Inc (NYSE: T) with a Buy rating and Level 3 Communications inc (NASDAQ: LVLT) with a Neutral rating.

• Stanford started EDO Corp (NYSE: EDO) with a Hold rating and $25 target; the firm believes EDO can be a turnaround story in 2007, but they recommend investors to stay on the sidelines until after Q4 earnings given their concerns over the quarter and guidance.

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

MOST NOTEWORTHY: The only company that topped today's list of initiations was Armstrong World Industries Inc (NYSE: AWI).

• 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.

OTHER INITIATIONS:

• 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.

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

MOST NOTEWORTHY: Garmin Ltd (GRMN) and USA Mobility (USMO) were today's notable initiations.

• JMP Securities initiated Garmin Ltd (NASDAQ: GRMN) with a Market Outperform and $60 target, saying that Garmin will benefit from strong GPS unit growth rates, a pick-up in aviation growth, also noting that checks indicate Garmin sales were strong over the holiday period.

• Soleil Securities started USA Mobility (NASDAQ: USMO) with a Sell rating and $11 target, as they believe USA Mobility is overvalued in a deteriorating industry.

OTHER INITIATIONS:

• USB initiated Level 3 Communications (NASDAQ: LVLT) with a Neutral rating and $7 target.

• First Albany started Quest Software (NASDAQ: QSFT) with a Neutral rating and $17 target, expecting volatile shares in the near-term due to the options investigation, but expects a resolution in 2007.

• BBN&T initiated NutriSystem Inc (NASDAQ: NTRI) with a Buy rating and $84 target. The firm believes NutriSystem is well positioned to sustain healthy earnings growth given consumer weight problems, along with the effectiveness and low consumer awareness of their program.

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