Is the market overpriced? Maybe it is cheap, or perhaps it is fairly valued. This is the third in a series examining the issue. Still, it has been my contention that it does not make any difference because no matter how the market is valued as a whole, there are plenty of cheap stocks out there to accommodate a large amount of capital allocation even this deep into a bull run.

If you would like to follow along from the beginning, the initial post screened stocks for lower than market average P/E ratios: Serious Money: Market Looks Cheap to Me -- 35 Stocks. In the second installment, I looked at yield and PEG ratios: Serious Money: Still Cheap Market -- 35 Stocks + Yields & Growth.

Let's try and reduce the gambling by examining the facts and ignoring what the bulls and bears are chatting up at the moment. We started the process by screening for lower than market average P/E ratios, see: Serious Money: Market Looks Cheap to Me -- 35 Stocks.

Two more important criteria influence today's review: the yield, a favorite of "my pal Warren"; and the price-to-earnings-to-growth (PEG) a focus of Peter Lynch, the retired fund manager extraordinaire of Fidelity's Magellan Fund.

We frequently receive comments that the market is overpriced. Recently one of our active readers commented that the market P/E was 30, which it's not. The actual rate (S&P forecast) has been even higher at times due to the volatile market.

The average should trend closer to the long term P/E of 15.7 in the next few years. However, I have reviewed companies often covered on our site and come up with a list of 35 stocks that have price-to-earning ratios below the long-term average already. I think there are dozens of bargains regardless of the status of the overall market.

Analyst Upgrades

• Baird upgraded Intel (INTC) to outperform from neutral and has a $26 target on the stock. The firm's checks indicate tier-one PC OEMs have raised their 1H10 procurement forecasts, which could lead to Intel outperformance.
• Citigroup upgraded UnitedHealth (UNH) to buy from hold on expectations the company will benefit from a sector rotation into Managed Care in 2010. The firm raised its price target on shares to $39 from $30.
• UBS upgraded Morgan Stanley (MS) to buy from neutral based on strong capital and liquidity positions, building investment banking pipelines, and expectations for a turn in EPS/ROE, among other reasons.
• Deutsche Bank upgraded the U.S. Refining group as it believes demand is improving and margins could expand in 2010. The firm raised its rating on Sunoco (SUN) to hold from sell and its target on shares to $25 from $18, and upgraded Tesoro (TSO) and Frontier Oil (FTO) to buy from hold.
• Boeing (BA) was raised to overweight from equal weight at Barclays.
• Wynn Resorts (WYNN) was upgraded at UBS to buy from neutral.
• Investors Bancorp (ISBC) was upgraded to buy from neutral at Janney Montgomery.

Standard & Poor's is performing some end-of-year cleanup on its benchmark index, the S&P 500 Index (SPX). My colleague Mark Fightmaster reported earlier that Visa (V) is set to replace Ciena Corp. (CIEN) on the widely watched market barometer, but that's not the only SPX development hitting Wall Street today. In fact, struggling insurance issue MBIA Inc. (MBI) is preparing to take its leave from the venerable index.

In a press release late Friday, Standard & Poor's explained that MBIA "currently ranks 500th in the index and is no longer representative of the S&P 500 index market cap space." The beaten-down insurance company will be replaced by Mead Johnson Nutrition (MJN), which is in the process of being spun off by Bristol-Myers Squibb (BMY).

Pfizer (PFE) closed at $18.49. December and January option implied volatility is at 27, March is at 28, versus its 26-week average of 32, according to Track Data, suggesting decreasing price movement.

Bristol-Myers (BMY) closed at $25.14. Overall option implied volatility of 25 is below its 26-month average of 28, according to Track Data, suggesting decreasing price movement.

Merck (MRK) closed at $36.70. December option implied volatility is at 27, January is at 28, below its 26-week average of 31, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Biopharmaceutical company Bristol-Myers Squibb (BMY) is performing on schedule, which is why I'm reiterating my buy rating for the company's shares, first recommended on June 1, 2009 at a price of $20.11. If you bought BMY in June, you're up about 24%.

Look for a 6-8% revenue increase for BMY in 2010, boosted by revenue gains in key proprietary drugs, led by Plavix (for the prevention of stroke, heart attack, and vascular disease). Also look for impressive results from new products Orencia (for rheumatoid arthritis) and Sprycel (for leukemia); BMY's nutritional products also should register a good year. The First Call FY2009/FY2010 EPS estimates for BMY are $2.02 to $2.21.

TheStreet.com's Jim Cramer says it looks like the patent worries aren't so dire after all.

Now that we see that health care reform is not going to bring price caps or socialization of medicine, we are beginning to see some real expansion in the drug stocks, including Merck (MRK) (Cramer's Take), Bristol-Myers (BMY) (Cramer's Take) and Lilly (LLY) (Cramer's Take). But there is one drug stock that is continually met with skepticism -- Sanofi Aventis (SNY) (Cramer's Take), the French vaccine and pharmaceutical maker run by Christian Viehbacher. The resistance is obvious, as his biggest two drugs are coming off patent very soon, and his hope is that by 2013 the company might again reach 2008 levels.

Sounds like there's no reason to buy this one. Sounds like its 4% dividend isn't safe.

TheStreet.com's Jim Cramer says you can be bearish, but you have to admit when you're wrong.

Oh boy, I hit a nerve. My last two days of donning the bear suit and imitating the bears has brought on a cacophony of critics, all of whom think that I am attacking them personally! That's right, they think I have read them, seen them and heard them and that I am spoofing them or making fun of them.

Moreover, they think that I am wildly bullish and that I am mocking them for not wanting to buy things here.

Despite largely positive corporate earnings reports, investor caution has set upon Wall Street. For the third straight day stocks are set to move into negative territory, with futures showing the three major U.S. indexes heading lower ahead of Thursday's opening bell.

Some blamed Wednesday's near 1% drops in the Dow Jones industrial average and the S&P 500 on a late-day sell-off driven by the latest Beige Book survey from the Federal Reserve that showed the economy is ever so slowly emerging from recession -- too slowly, it would seem, for investors.

"Being contrarians, we are always looking for laggard stocks with the potential to rebound," says turnaround expert George Putnam.

In his The Turnaround Letter, the advisor reviews four medical and pharmaceutical stocks that have been among the worst performers in the S&P 100 since the market bottom. Despite their poor performance, he thinks they may be due for a rebound.

"We think that investors who got left behind by the first leg of the market rally are struggling to catch up.

Analyst upgrades:

• Piper Jaffray upgraded Viacom (NYSE:VIA) to Overweight from Neutral to reflect the improving ad market and better ratings at key cable networks. The firm raised its target on shares to $35 from $29.
  
• Baird upgraded Research in Motion (NASDAQ:RIMM) to Outperform from Neutral on valuation as it views the recent weakness as a buying opportunity. The firm keeps an $84 price target on shares.
  
• Jefferies upgraded Usana (NASDAQ:USNA) to Buy from Hold as it believes direct selling companies have been gaining momentum. The firm raised its target on shares to $44 from $37.
• AK Steel (NYSE:AKS) was upgraded to Buy from Hold at Deutsche Bank.
  
• First Merit (NASDAQ:FMER) was upgraded to Perform from Underperform at Oppenheimer.
  
• Spectra Energy (NYSE:SE) was upgraded to Conviction Buy from Neutral at Goldman.

I'm reiterating my Buy rating for Bristol-Myers Squibb (NYSE: BMY), first recommended on June 1, 2009 at a price of $20.11.

The low, single-digit revenue growth story remains intact for Bristol-Myers Squibb in FY2009. Hence, place BMY in the category of a get-ahead-of-the-pack play.

What are auction rate securities? How did these securities cause billions in losses to investors and businesses?

Auction rate security, according to Wikipedia, "refers to a debt instrument (corporate or municipal bonds) with a long term maturity for which the interest rate is regularly reset at a dutch auction."

Throughout the 1990s and up to 2008, bank loans became more expensive. As a result, ARSs became increasingly attractive. They were lower in cost and flexible for variable rate debt. Auctions were typically held every 7, 28 or 35 days.

So what happened to cause such big losses?

TheStreet.com's Jim Cramer says even stocks without exposure to that country will probably be on sale today.

If China has pulled back 20%, do we have to pull back 20%, even though they were up 80% and we are up 9%? Are we so in lock step now that when China catches a cold, we are the ones with pneumonia?

I don't think so. It's such an easy story to stretch out, though you can see that our Freeports (NYSE: FCX) (Cramer's Take) and our Exxons (NYSE: XOM) (Cramer's Take) can get hammered.