MOST NOTEWORTHY:

• Lehman initiated the Retail Hardlines Sector with a Neutral. The firm initiated coverage of Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) with Overweight ratings and Best Buy (NYSE: BBY), Bed Bath & Beyond (NASDAQ: BBBY) and Williams Sonoma (NYSE: WSM) with Equal Weight ratings.
  
• Oppenheimer initiated Aventine Renewable (NYSE: AVR), Pacific Ethanol (NASDAQ: PEIX) and VeraSun Energy (NYSE: VSE) with Perform ratings. The firm is cautious on the industry due to higher feedstock costs.
  
• UBS initiated Interpublic Group (NYSE: IPG) and Omnicom Group (NYSE:OMC) with Buy ratings and an $11 target and $62 target, respectively. The firm views valuation as attractive.

• Morgan Stanley assumed coverage of International Flavors (NYSE: IFF) with an Overweight rating.
  
• Wachovia initiated CGI Group (NYSE: GIB) with a Market Perform rating.
  
• Leap Wireless (LEAP) was initiated at RBC Capital with a Sector Perform rating and $55 target.

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Citigroup downgraded US Steel (NYSE:X) from "buy" to "hold" according to Briefing.com. The financial news service also reports that Deutsche Bank downgrade Procter & Gamble (NYSE:PG) to "hold" from "buy"

International Paper (NYSE:IP) was cut to "neutral" from "outperform" at Credit Suisse according to 24/7 Wall St. The financial website also reports that Intl Flavors & Fragrances (NYSE:IFF) was cut to "underweight" from "neutral" at JPMorgan.

Douglas A. McIntyre

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Without this company, our laundry detergent would smell like cleaning fluid and our toothpaste taste like anti-freeze. International Flavors and Fragrances (NYSE: IFF) develops and manufactures the ingredients used in thousands of consumer products. The company is doing well, but you wouldn't know it by looking at its stock price.

It opened the year trading at $48.92, just about where it trades now, closing recently at $48.58, down $1.01 after reaching a high of $52.05 in mid-June. Part of the reason the stock is stuck is that IFF is thinly covered by analysts because it does not sell directly to consumers and has little name recognition.

Also, investors may be wary of any company that reports increasing interest expenses quarter after quarter. In the case of IFF, much of the interest expense increase is due to capital expenditures to build a new manufacturing facility in China, a market with huge growth potential for Western branded consumer products for which IFF will supply essential ingredients.

IIFF is in the midst of a stock repurchase program and recently authorized payment of a $0.21 per share dividend. Its P/E ratio is right at industry average, but the EPS is two and a half times industry average. The company devotes a lot of resources to R&D to track consumer tastes, literally. Such tracking is paying off handsomely in the company's increase in sales, net income and EPS quarter after quarter.

Recently released 2Q 2007 earnings indicate that overall sales of flavors and fragrances were up 8% to $574 million. This comes on top of an overall sales increase of 11% in 1Q 2007. Increase in sales is being driven primarily by the introduction of new products and higher volume sales of raw fragrance ingredients, despite downward pressure on raw ingredients selling prices.

Second quarter EPS increased 30% to $0.87, including a favorable tax adjustment of $0.11 per share. This increase is in addition to 1Q EPS increase of 19%. Despite a dramatic growth in sales, IFF has kept the lid on cost of sales which declined slightly in the quarter.. This decline was, howewver, offset by a rise in interest expense by $2 million on top of a $3 million increase in 1Q. The cost of borrowing money has increased to 4.2% and will probably continue to rise in modest increments quarter over quarter.

The few analysts who cover IFF expect big things. Their average target price for the stock is $60.50. Two analysts have upgraded the company since July. For now, there seems to be plenty of room to join this bandwagon.

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The market managed to make some small gains today; it dipped on the Fed announcement but then recovered. The Fed left rates unchanged and I think this was the heart of the announcement.

"Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy."

While Cramer thinks the Fed out of touch... I think their analysis is accurate.

The NYSE had volume of 4.3 billion shares with 1,882 shares advancing while 1,409
declined for a gain of 52.3 points to close at 9,606.07. On the NASDAQ, 2.8 billion shares traded, 1,754 advanced and 1,327 declined for a gain of 14.27 to 2,561.6.

Chipotle Mexican Grill (NYSE: CMG) rose $9.10 (9%) to $108.50. Lennar Corporation (NYSE: LEN) rose $2.13 (7%) to $34.49. International Flavors & Fragrances (NYSE: IFF) fell $3.23 (-6%) to $47.45 as net sales rose 8%. Circuit City Stores (NYSE: CC) fell $0.62 (-6%) to $10.57. MasterCard Incorporated (NYSE: MA) rose $6.65 (5%) to $144.27.

The most active and interesting option today include the following. QualComm (NASDAQ: QCOM) had heavy volume on the September 45 calls (AAOII) with over 63,000 options trading; the company was in the news on a patent case. Cisco Systems (NASDAQ: CSCO) moved volume on the August 30 calls (CYQHF) with over 62,000 options trading ahead of 0.36 cent per share earnings. CBOE S&P 500 Volatility Index (NASDAQ: $VIX) saw heavy volume on the September 25 calls (VIXIE) with over 39,000 options trading. In options there were 7 million puts and 7.4 million calls traded for a put/call open interest ratio of 0.95.
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Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

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MOST NOTEWORTHY:

• Baird upgraded J.B. Hunt Transport Services Inc (NASDAQ: JBHT) to Outperform from Market Perform based on strong trends in Intermodel, valuation, and a $500M share buyback.

• Pacific Growth upgraded shares of Nvidia Corp (NASDAQ: NVDA) to Buy from Neutral citing valuation.

• Buckingham upgraded International Flavors (NYSE: IFF) to Accumulate from Neutral following the company's Q1 report.

• RealNetworks Inc (NASDAQ: RNWK) was raised to Buy from Accumulate at ThinkEquity after its Q1 report.

• Susquehanna upgraded Marchex Inc (NASDAQ: MCHX) to Positive from Neutral. Susquehanna has increased confidence that Marchex will be able to increase monetization via Yahoo!'s (YHOO) Panama upgrade, improving 2008 TAC rates and increased value of owned sites following a major upgrade for 2H07.
  

• Jefferies raised Symantec Corp (NASDAQ: SYMC) shares to Buy from Hold with a $21 target.

• JP Morgan upgraded Comverse Technology Inc (NASDAQ: CMVT).

• Raytheon Co (NYSE: RTN) was upgraded to Overweight from Equal Weight at Lehman Brothers.

• SPX Corp (NYSE: SPW) was raised to Neutral from Underperform at Needham.

• Wachovia upgraded IntercontinentalExchange, Inc (NYSE: ICE) to Outperform from Market Perform.

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For years as a financial reporter in the 1990s, I heard mutual fund managers crow about the benefits of investing in "consumables" -- companies that make products that people buy, use up, and discard or recycle. Customers of such companies have to go out and buy more quite regularly, which keeps sales afloat even in rough economic times.

Gillette, with its razors and batteries, was usually the poster child for this investment theme. Printer maker Lexmark International (NYSE: LXK) was another fave.

But then Procter & Gamble Company (NYSE:PG) bought Gillette in 2005. And Lexmark ran into tough times with ever more heated competition from the likes of Hewlett-Packard Company (NYSE:HPQ) and Canon Inc. (NASDAQ: CAJ). Lexmark's stock was doing better for a while last year, but in the past month alone it has fallen from about $71 to $61 and UBS just downgraded it to "reduce" a week ago -- ouch!

A new crop of pureplay favorites on the consumables theme hasn't surfaced yet. But a recent feature from SmartMoney.com on when to replace common household items, suggests some new stocks to consider as possible consumables plays:

Estee Lauder (NYSE: EL) makes cosmetics, which should be either used up or replaced every three months to two years, according to SmartMoney. Most analysts rate it a hold, but the stock jumped about $6 in late January and is still trading around $47. Avon Products (NYSE: AVP) and Elizabeth Arden (NASDAQ: RDEN) shares have also performed well on a general uptick among several cosmetics makers.

Also part of this trend, is International Flavors & Fragrances (NYSE: IFF). It is under-followed by Wall Street (brokers give it one buy rating and two holds), but it has been a great stock over the past year. SmartMoney says perfume ought to be replaced every two years.

Running shoes have to be replaced regularly (as does all athletic apparel used by serious athletes). Nike Inc. 'B'(NYSE: NKE) gets high marks on Wall Street and is a clear beneficiary of sports-related consumables.

Spices are another item on SmartMoney's list and McCormick & Co. (NYSE: MCK), which gets six buys, four strong buys and eight holds among analysts, looks like a decent stock for future investigation to me.

Mattresses, which some people keep for decades, ought to be part of the new consumables trend, according to SmartMoney. Mattress-maker Sealy (NYSE: ZZ), seems the favorite in this not-so-favored industry, with three analysts rating it a strong buy, five a hold and one a sell. Tempur-Pedic International (NYSE: TPX) is rated by most as a hold, as is high-end bedmaker Select Comfort (NASDAQ: SCSS). But Select Comfort surprised Wall Street with a growth forecast for 2007 when it reported earnings on Feb 7, making it an interesting choice.

And lets throw computers, which the magazine says should be replaced every four years, into the mix. After a turbulent year, Dell Inc. (NASDAQ: DELL) is starting to get some strong buys once again, now that it boasts founder Michael Dell back in the CEO role. Hewlett-Packard has been a favorite stock for the past two years and is still much-loved. Both those companies also do a booming business in printers and printer cartridge sales, which make them good fits for the consumables trend.

Finally, Procter & Gamble, which not only owns Gillette but makes toothbrushes, soaps and all manner of consumer goods, deserves to make the list. It may not be a pureplay on the consumables trend, but it makes more consumer products than just about any company out there and is a safe harbor stock worthy of any long-term portfolio.

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MOST NOTEWORTHY:

• Genesis Microchip Inc (NASDAQ: GNSS) was downgraded to Sell from Hold at Roth Capital, citing the loss of significant market share, and to Market Weight from Overweight at Thomas Weisel following the company's disappointing earnings report.

• Columbia Sportswear Co (NASDAQ: COLM) was downgraded to Sell from Hold at Matrix USA based on valuation.

• Calyon downgraded Gentex Corp (NASDAQ: GNTX) to Sell from Neutral.

• Following the company's fourth-quarter report, Buckingham downgraded International Flavors & Fragrances Inc (NYSE: IFF) to Neutral from Accumulate.

• Bank of America downgraded Clear Channel Communications Inc (NYSE: CCU) to Neutral from Outperform with a $37 target, as shares are pricing a best-case scenario of a deal and sees downside risk if the deal falls apart.

• Following fourth-quarter results and reduced guidance, Friedman Billings downgraded shares of Phelps Dodge Corp (NYSE: PD) to Market Perform from Outperform with a $125 target.

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Jim Cramer, never one to rest on a single industry segment, discussed the quest for youthfulness tonight on his ever-popular MAD MONEY show.

If you want your body to look like a teenager's but your bank balance to scream "old fogey," Cramer advises that you avoid Bare Escentuals, Inc. (NASDAQ:BARE). He calls it a fad that isn't going anywhere, and says if you own it you should "ring the register." It was spun off by an LBO firm, but now it's too late; the company won't make you money. Cramer had regrets over this one: he didn't tell a caller on Friday to sell, and wished he had.

Better options if you want to capitalize on America's quest for eternal youth? Cramer likes Allergan, Inc. (NYSE:AGN) for its Botox and Medicis Pharmaceutical Corporation (NYSE:MRX) for its competing product. He counselled against the big, luxury names in the space: Avon Products Group (AVP), The Estee Lauder Co. (NYSE:EL) or Revlon, Inc. (NYSE:REV). Cosmetic companies are unreliable to Cramer.

Cramer did say International Flavors & Fragrances Inc. (NYSE:IFF) is a good alternative, even though it is close to a 52-week high. He thinks the company is much better with scents and steady end markets. Soon it will split into two businesses, he says, as it creates sweet ingredients that it sells to large companies like P&G. He said IFF only trades at 16x forward earnings and it has consistent 10% earnings growth. The best pick of the bunch? IFF, Cramer says.

[Photo Michael McCauslin]

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