High you high octane fans, FBR Capital is upgrading Talbots (NYSE:TLB) to Outperform from Market Perform while raising tgt to $4 from $2.

The upgrade comes since they believe:

1) the risk/reward from current levels is attractive, as they believe the stock already discounts the ongoing challenging business;

2) the looming threat of bankruptcy has been greatly reduced; and

3) merchandise improvements continue in the company’s spring product flows.

To be clear, FBR is recommending shares of TLB to more speculative investors with a high tolerance for risk. They fully appreciate the ongoing issues with the company’s balance sheet but note the company has made tremendous progress in stabilizing its liquidity situation. Firm also points out that the company is in the process of selling the J. Jill division, which could potentially be a positive catalyst to shares. They have noted three concerns looming over the company—liquidity risk, vendor risk, and operational risk—each of which, they believe, has been lessened. Finally, in their opinion, current consensus estimates might be low enough to give the company some “breathing room.” Firm stresses that the fundamental story is not yet fully apparent; nonetheless, they believe investors with a higher risk appetite may find TLB interesting.

We have seen investors “chasing beta” in such names as ANN, PSUN, and even TWB; investors have put money to work in stories that hold the promise of significant upside, and also have attempted to mitigate the biggest risk of all: bankruptcy.

Notablecalls: Will TLB join the ranks of Tenet (NYSE:THC) and Zale (NYSE:ZLC)

This one has a whopping 27% short interest - most of them betting on what? Chap 11? FBR saying it ain't happening here. When FBR's otherwise so cynical retail analyst says so, I tend to listen.

Not making an outright call here but this one can do $3+ if the market holds.