Jim Stack is well known for his "safety-first" approach to money management, focusing on a balance between risk and reward. In his InvesTech market Analyst, he notes, "We now see a window of opportunity in Waters (NYSE: WAT).

Here, Bruce Morison, consultant for Stack Financial Management, explains, "In a market overreaction to a weaker-than-expected fourth quarter, an opportunity has been created to invest in this high-quality company at an attractive valuation level.

"The stock dropped 20% when the company reported earnings that were $0.08 shy of the $1.06 estimate that Wall Street was forecasting. The shortfall was primarily a result of a higher-than-expected tax rate for 2007 and weaker sales in Japan.

"The Japan results reflected a change in government regulations for water testing. Our concern over this event is limited given that Japan accounts for less than 10% of the Waters' sales and is not a key growth market for the firm.

"A quick recap of the company ... Waters Corporation is a medium sized company based in Milford, Massachusetts which designs, manufactures, and services high performance liquid chromatography (HPLC) and mass spectrometry (MS) instrument systems.

MOST NOTEWORTHY: The Wet Seal (WTSLA), Brocade Communications Systems(BRCD), IAC/InteractiveCorp (IACI), CME Group (CME) and Rogers Communications (RCI) were today's noteworthy initiations:

• Merriman believes the turnaround at Arden B is well underway and both it and the Wet Seal chains have tremendous opportunities for long-term growth, initiating The Wet Seal (NASDAQ: WTSLA) with a Buy rating.

• Pacific Growth is positive on Brocade's (NASDAQ: BRCD) diversification into new products and services, starting shares with a Buy rating.

• Banc of America initiated shares of InterActiveCorp (NASDAQ: IACI) with a Neutral rating.

• William Blair believes the newly-formed CME Group (NYSE: CME) has an even more dominant competitive position within the growing futures exchange industry, reinstating shares with an Outperform rating.

• JP Morgan said Canada is an attractive wireless market and that Rogers Communications (NYSE: RCI) is well positioned, starting shares with an Overweight rating...

OTHER INITIATIONS:

• Deutsche Bank initiated Waters Corp (NYSE: WAT) with a Hold rating.

• Goldman started Infinera Corp (NASDAQ: INFN) with an Equal Weight.

• Kaufman reinstated Savvis (NASDAQ: SVVS) with a Hold.

• Pacific Growth initiated Network Appliance (NASDAQ: NTAP) with a Buy.

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

MOST NOTEWORTHY: Pharmion Corp (PHRM), Genesis Microchip (GNSS) and SanDisk Corp (SNDK) were some of today's most notable downgrades:

• Pharmion Corp (NASDAQ: PHRM) was downgraded to Sell from Source of Funds at ThinkEquity, citing valuation.

• Matrix USA downgraded Genesis Microchip Inc (NASDAQ: GNSS) to Strong Sell from Hold to reflect a share decline in revenues; they also believe shares are overvalued relative to the sector.

• SanDisk Corp (NASDAQ: SNDK) was cut to Hold from Buy at WR Hambrecht. The firm said it has learned that a crack in the IP story has occurred, as Samsung has found a way to significantly reduce its royalty payments to SanDisk on its finished SD cards that it is currently shipping. The firm said this step by Samsung puts at risk ~15% of SanDisk royalty revenues as early as Q2:07, as Samsung is no longer willing to pay the 8% royalty rate to SanDisk on NAND MLC SD cards.

OTHER DOWNGRADES:

• Stephens downgraded Group 1 Automotive Inc (NYSE: GPI) to Equal Weight from Overweight following disappointing Q1 results.

• JMP Securities downgraded Flanders Corp (NASDAQ: FLDR) to Market Perform from Outperform.

• Oppenheimer cut ValueClick Inc (NASDAQ: VCLK) to Neutral from Buy on valuation.

• Matrix USA downgraded L-1 Identity Solutions (NYSE: ID) to Sell from Buy on valuation.

• Goldman took Medco Health Solutions Inc (NYSE: MHS) off its Conviction Buy List, citing valuation.

• Raymond James lowered Hiland Holdings (NASDAQ: HPGP) rating to Outperform from Strong Buy.

• JP Morgan cut Waters Corp (NYSE: WAT) to Neutral from Overweight based on valuation.

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