We remain concerned regarding operational performance in the near-term given severe price declines in DRAM. The firm has announced they plan to exit the DRAM business. We believe shares are currently fully valued and expect shares to trade at current valuation metrics. We continue to rate shares of SMI a Hold. We have set a price target of $4.00.

Telefonica Dominance Priced In

We maintain our Hold rating for Telefonica S.A. (TEF), the largest telecommunications company in Spain and Latin America. The company has been delivering strong quarterly results with improvements driven by strong performance in European and Latin American regions and healthy business momentum across wireless, broadband and Pay TV operating segments.

The company continues to generate strong free cash flow and offers a respectable dividend payout. However, the environment remains challenging with strong competition and we are exercising caution about the company's aggressive acquisition strategy, along with the integration process following such initiatives. Furthermore, there is the need to consider the currency exchange rate, which is associated with the Euro versus U.S.D as the dollar may be reaching its lower inflection point.

Telefonica is trading at 10.3x our 2008 earnings estimate, which is at a discount to the industry average as well as to the S&P 500 metric. Telefonica's dominant position in the Spanish telecom market (both fixed-line and wireless), and attractive growth prospects in Latin America are the baseline reasons for recent investor interest in this security. Our six-month price target of $90.00 per ADS is based on 11.0x our 2008 EPADS estimate.

Ahead of Earnings, Buy NuStar

We are maintaining our Buy recommendation and earnings estimates for NuStar Energy, L.P. (NS) units ahead of the partnership's second-quarter results. We continue to like the partnership for its diversified asset base, strong distribution-growth prospects and attractive valuation.

The inclusion of the asphalt business in the asset mix further adds to the partnership's diversification and growth prospects. A strong pipeline of organic growth projects and contribution from acquisitions provide the partnership with an above peer group average distribution coverage ratio. We estimate that the partnership can sustain distribution-growth in the 8%-9% annual range over the next few years.

The recent acquisition of CITGO's asphalt assets help diversifies the partnership's operations and further increases its growth prospects. The partnership currently has a number of ongoing projects, which are expected to start contributing to results over the next twelve months. NuStar's current quarterly distribution represents a 7.7% year over year increase to an annualized run rate of $3.94 per unit, representing an attractive yield of 8.42%. With an above peer-group average distribution coverage level and a GP IDR cap of 25%, NuStar's distribution growth prospects remain very attractive.

Given the partnership's comfortable distribution coverage ratio, improved distribution-growth prospects and expected completion of a number of growth projects in the near term, and the 25% general partner distribution split, we continue to see upside from current levels. Our new $54 price objective, reduced from $59 before, reflects a distribution run rate of $4.25 per unit and yield of 7.87%. Our yield assumption is based on a 337 bps spread, in line with other faster growing MLPs, over our 10-year Treasury bond yield expectation of 4.50% over the next 12 months.