Stock Upgrades, Downgrades From TheStreet.com Ratings

Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.

While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.

For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.

The following ratings changes were generated on March 3.

Enerplus Resources Fund (ERF Quote), an open-end investment trust that owns a diversified portfolio of crude oil and natural gas producing properties, has been upgraded to buy. At 74%, the company's gross profit margin is very high, and its net profit margin of 36% significantly outperforms the industry average. ERF's debt-to-equity ratio of 0.28 is very low but is higher than the industry average, and its quick ratio of 0.39 demonstrates an inability to pay short-term obligations.

For the fourth quarter, revenue fell 9.8% year over year to $273.2 million, and earnings per share dropped to 76 cents from 89 cents in the same period. Net operating cash flow has declined 1% to $205.08 million. Share price has not changed much in the past year. With a price-to-earnings ration (P/E) of 16.19, the stock is slightly more expensive than its industry peers. We feel, however, that other strengths this company displays offset this slight negative. Enerplus Resources Fund had been rated hold since Dec. 10.

Leucadia National (LUK Quote), which, through its subsidiaries, engages in manufacturing, real estate, medical product development and winery operations in the U.S., has been upgraded to buy. For the fourth quarter, revenue leaped 86% year over year to $262.6 million, and EPS jumped to $1.87 from 3 cents over the same period. Leucadia's debt-to-equity ratio, 0.38, is low, implying successful management of debt levels, and its quick ratio of 3.42, demonstrates the ability to cover short-term cash needs.

Shares have surged 60% over the past year, and should continue to rise despite the nice gain. Net operating cash flow has increased 103% to $56.2 million year over year, modestly surpassing the industry average cash flow growth rate. Leucadia had been rated hold since Oct. 27, 2006.

Caraco (CPD Quote), a pharmaceutical company, has been upgraded to buy. For the third quarter of its fiscal 2008, revenue leaped 162% to $81.9 million, and EPS improved to 28 cents from a 25 cents over the same period. This strong earnings growth and other factors have driven shares up 51% over the past year. We believe the stock should continue to climb.

The company's return on equity increased year over year to 25.5% from 12.7%. This is a signal of significant strength within the corporation. The company's return on equity significantly exceeds the industry average and is above that of the S&P 500. Caraco had been rated hold since Aug. 20.

Companhia Vale do Rio Doce (RIO Quote), which operates as a diversified metals and mining company worldwide, has been downgraded to hold. Strengths such as solid stock price performance and impressive EPS growth are countered by weak cash flow from operations. Shares have surged 104% over the past year. However, we do not recommend additional investment in this stock despite its gains in the past year.