Readers of this space know that the preference here is for large cap companies, with demonstrated business models, and favorable long-term factors, that have the resources to ride-out short-term economic downturns, including recessions.

And in this category a railroad stock represent a prudent addition to a portfolio, for investors who can tolerate moderate risk.

Pick a railroad. Virtually any railroad. Odds are, you will do fine, long-term, as the nation continues to re-discover the valuable asset - - the national treasury, really - - of its railroads. (More on that latter topic, in a future blog.)

Here are the railroad plays, ranked by risk, with the top stock, BNI, being the lowest risk. A stop/loss, if one were to buy the stock, is also listed:

MOST NOTEWORTHY: Pharmacopeia, Zumiez, Norfolk Southern and OccuLogix were today's noteworthy upgrades:

• CIBC upgraded Pharmacopeia (NASDAQ: PCOP) to Sector Outperformer from Sector Performer, as they believe its lead cardiovascular drug DARA has the potential to become an important new therapy for hypertension and diabetic nephropathy.
  
• Think Equity upgraded shares of Zumiez (NASDAQ: ZUMZ) to Buy from Accumulate to reflect the company's strong same store sales growth.
  
• Norfolk Southern Corporation (NYSE: NSC) was upgraded to Equal Weight from Underweight at Lehman Brothers on valuation.
  
• Caris upgraded shares of OccuLogix (NASDAQ: OCCX) to Above Average from Average, as they believe weakness in the stock creates a buying opportunity. The firm believes the stock has dropped due to concerns about the company's cash position, but thinks the current stock price underestimates the revenue potential of the company's assets.

OTHER UPGRADES:

• BRE Properties (NYSE: BRE) was upgraded to Outperform from Neutral at Credit Suisse.
  
• Bear Stearns raised Capital Product Partners (NASDAQ: CPLP) to Outperform from Peer Perform.
  
• JP Morgan upgraded Celestica (NYSE: CLS) to Neutral from Underweight.
  
• Stifel upgraded SL Green Realty (NYSE: SLG) to Buy from Hold.

Given investors anxiousness about the economy and hearing more gloom and doom than I think is warranted, I thought I would get back to basics with "my pal" Warren, and add to the series I started several months ago. I decided to write the series after receiving encouragement from friends and associates that read With Warren Buffett by my side ....

Today, I am writing about the concept of Durable Competitive Advantage, which is the ability to get ahead and stay ahead with a high level of certainty. It is also referred to as Sustainable Competitive Advantage.

To achieve a Durable Competitive Advantage, several factors have to be present. One is a big moat (Buffett expression) surrounding the enterprise. This usually means businesses that sell commodities where price is the primary factor in determining opportunity, have no moat as price takers. Their profit margins are not easily defendable. Another factor is barrier to entry. How easy would it be for someone to enter the same business and compete? The T-shirt business is a good example, of something without a Durable Competitive Advantage. Anyone could enter this business in one day, and they do. So unless the business has some unique concept, it does not have the promise of relatively predictable and sustainable profit margins in the future.

It's a big deal whenever Warren Buffett so much as sneezes, and this morning was no different. Berkshire Hathaway's (NYSE: BRK.A) decision to boost its stake in Burlington Northern Santa Fe (NYSE: BNI) made the expected splash, and up went Burlington's stock 3%.

Back in April, Berkshire disclosed an 11% stake in Burlington, and then in May it announced investments in two other railroads: Norfolk Southern Corp (NYSE: NSC) and Union Pacific Corp (NYSE: UNP). Buffett clearly sees value in riding the railroads.

Then today came Berkshire's disclose that it had raised its stake from August 3 through August 7 to 11.5% from 11% -- which, while not exactly earth shaking, is a strong indicator that Buffett sees the recent price weakness enveloping the market as a buying opportunity. Usually when the "oracle" Mr. Buffett sees something, it is worth paying attention.

One day after my colleague Sheldon Liber wrote an interesting posts about railroad stocks, Bloomberg News reported that Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) had become the largest shareholder of Burlington Northern Santa Fe Corp. (NYSE: BNI)

Coincidence? I think not.

Liber wrote that Burlington Northern along with CSX Corp. (NYSE:CSX) and Norfolk Southern Corp. (NYSE:NSC) were worth watching. He even noted that, "If you read any commentary from Warren Buffett you will learn that he looks for strong cash flow as a sign of success and resists investing in companies with a lot of debt."

It has about $6.7 billion in long-term debt. Free cash flow after dividends was $712 million in 2006. The railroad reports earnings April 24. Analysts are expecting earnings of $1.09 on revenue of $3.67 billion, according to Thomson Financial. The mean target price for the stock, which closed Thursday at $82.92, is $88.54.

Shares of Burlington Northern are bound to jump when the market reopens Monday when investors try to go all board.

Sorry, I couldn't resist one bad railroad pun.

MOST NOTEWORTHY: YRC Worldwide Inc (YRCW), Baidu.com, Inc (BIDU), an several e-commerce names were today's more notable initiations:

• Prudential started YRC Worldwide Inc (NASDAQ: YRCW) with an Underweight rating and $41 target. The firm said recent organizational changes could be a distraction in what it expects to be a challenging first-half of 2007.

• Susquehanna views Baidu.com Inc (NASDAQ: BIDU) as a strategic holding in its China portfolio and expects the company's massive brand value to drive continuous growth; shares were initiated at Susquehanna with a Positive rating.

• Oppenheimer initiated three e-commerce names today:
  
• eBay Inc (NASDAQ: EBAY) was initiated with a Buy rating and $38 target
• Overstock.com, Inc (NASDAQ: OSTK) and Amazon.com, Inc (NASDAQ: AMZN) were initiated with Neutral ratings.

OTHER INITIATIONS:

• In addition to YRC Worldwide, Prudential initiated several companies in the transportation sector:
  
• Con-Way Inc (NYSE: CNW) was started with an Underweight rating and $47 target
  
• Canadian Pacific Railway (NYSE: CP) and Norfolk Southern (NYSE: NSC) were initiated with Overweight ratings
  
• Canadian National Railway (NYSE: CNI) was initiated with a Neutral rating and $47 target.

• Jefferies initiated Forest Oil Corp (NYSE: FST) with a Buy rating and $42 target.

• Citigroup believes aQuantive, Inc (NASDAQ: AQNT) will be one of the key beneficiaries of the strong secular growth in online advertising and they note that shares are trading in the lower half of its 52-week range; shares were initiated with a Buy rating and $33 target.

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

MOST NOTEWORTHY: The Railroad Sector and Obagi Medical (OMPI) were today's most notable initiations:

• Calyon Securities initiated coverage on the following stocks, all with Neutral ratings, including Burlington Northern Santa Fe Corp (NYSE: BNI), Canadian National Railway Co (NYSE: CNI), Canadian Pacific Ltd (NYSE: CP), CSX Corp (NYSE: CSX), Norfolk Southern Corp (NYSE: NSC).and Union Pacific Corp (NYSE: UNP).

• Obagi Medical (NASDAQ: OMPI) was initiated by Baird with an Outperform rating and $13 target; CIBC started the specialty pharmaceutical company with a Sector Outperformer rating and $14 target, saying the company is a pure play in the rapidly-growing aesthetics market and has expectations that the company's growth will accelerate due to the rise in physician-dispensed products.

OTHER INITIATIONS:

• MasterCard Inc (NYSE: MA) was initiated with a Neutral rating at Merrill Lynch.

• Xoma Ltd (NASDAQ: XOMA) was initiated with a Market Outperform rating at Rodman & Renshaw. The firm said XOMA's antibody technology licenses and manufacturing provide an important source of consistent and growing commercial revenues. Additionally, the broker said Raptiva is becoming a more meaningful contributor.

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

MOST NOTEWORTHY: Norfolk Southern and Abercrombie & Fitch were today's most notable upgrades.

• Citigroup upgraded shares of Norfolk Southern (NYSE: NSC) on valuation as they believe the recent weakness has brought shares to an attractive level.

• Merrill Lynch upgraded shares of Abercrombie & Fitch Co 'A' (NYSE: ANF), as the firm does not believe the stock's current valuation reflects the company's growth opportunities; additionally, the firm sees significant growth opportunities at the Hollister brand and expects free cash flow growth in 2007.

OTHER UPGRADES:

• Goldman Sachs upgraded Wellpoint Inc (NYSE: WLP) to Buy from Neutral, believing the company is better positioned in comparison to their peers to weather increasing price competition.

• Matrix USA upgraded TETRA Technologies (NYSE: TTI) to Buy from Hold, as Tetra continues to invest in expanding its well abandonment and decommissioning services in order to meet growing long-term demand forecasts, and its fluid division continues to benefit from higher bromine selling prices.

• JP Morgan added Outperform rated DivX Inc (NASDAQ: DIVX) to their Focus List.

• UBS upgraded Ingersoll-Rand (NYSE: IR) to Buy from Neutral.

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

MOST NOTEWORTHY: Gap (GPS), Red Hat (RHAT) and Red Robin (RRGB) top today's extensive list of downgrades.

• Gap, Inc. (NYSE:GPS) was downgraded to Hold from Buy on valuation at Citigroup. The firm believes the 25% rally in the past two months had priced in much of the improvements at Gap.
• Red Hat, Inc. (NASDAQ:RHAT) was downgraded at Robert W. Baird to Neutral from Outperform following Microsoft Corp.'s (NASDAQ:MSFT) partnership announcement with Novell, Inc. (NASDAQ:NOVL).
• Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) was downgraded at four firms this morning: CIBC, Friedman Billings Ramsey, Bank of America and Bear Stearns. The downgrade was based on weakness in new markets and a reduction in earnings growth.

OTHER DOWNGRADES:

• Qualcomm, Inc. (NASDAQ:QCOM) was downgraded to Neutral from Buy at Oppenheimer, citing disappointing guidance and indications that the licensing dispute with Nokia (NOK) could extend several quarters.
• Needham downgraded Powerwave Technologies, Inc. (NASDAQ:PWAV) to Hold from Buy after their weak fourth quarter report.
• Norfolk Southern Corp. (NYSE:NSC) was downgraded at JP Morgan to Neutral from Overweight. The firm cited valuation and competitive pressures from CSX Corp (CSX).

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