MOST NOTEWORTHY: American Eagle, Hologic and British Airways were today's noteworthy downgrades:

• Friedman Billings downgraded American Eagle (NYSE: AEO) to Underperform from Market Perform citing slowing top-line growth, difficult macro-environment, and the challenging women's category.
  
• Soleil cut Hologic (NASDAQ: HOLX) to Hold from Buy as it believes the cancellation of the FDA Radiological Devices Panel means a further delay in the tomosynthesis pre-market approval application.
  
• ABN downgraded shares of British Airways (Other OTC: BAIRY) to Sell from Hold as it believes the recent rally in the face of higher oil prices is unjustified. Shares were also lowered at Deutsche Bank to Sell from Buy as it believes the company may not be able to raise ticket prices enough to offset higher fuel costs.

OTHER DOWNGRADES:

• ArthroCare (NASDAQ: ARTC) was cut to Accumulate from Buy at ThinkPanmure.
  
• ING downgraded J Sainsbury (Other OTC: JSAIY) to Sell from Hold.
  
• RBC Capital downgraded Ceragon Networks (NASDAQ: CRNT) to Sector Perform from outperform.

Remember the January Effect? A phenomenon where stocks, especially small caps, rally from the end of December, through the first week of trading in January, as investors are able to buy into names that had been sold in order to recognize tax losses. This has been a forgotten strategy for investors over the last few years, but my hunch is that we will see it return stronger than ever this year. Why? Because some of these stocks have gotten crushed due to the market volatility since the summer, and their big losses were exaggerated by tax loss selling. Here are two picks that are poised to gain from the January Effect:

Federal Home Loan Mortgage Corp. (NYSE: FRE) - while not a small-cap, this stock nonetheless should be in store for a spike. The government-sponsored enterprise creates liquidity in the residential mortgage market by guaranteeing, purchasing, securitizing and investing in such loans. FRE has lost more than have of its value recently, and certainly part of that was caused by sellers looking for a loss.

Ceragon Networks (NASDAQ: CRNT) - The WiMax company has been in a downturn ever since it had trouble doing a secondary offering, which ended up being priced just before the announcement that Sprint/Nextel (NYSE: S) was exiting this WiMax network. Investors should look at this with a bit of perspective, as Intel (NASDAQ: INTC) and Nokia (NYSE: NOK) are all still forging ahead with the technology. My buddy Zack Miller has a nice analysis of this. Look for Ceragon to have a strong bounce over the next few weeks.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/19/07.

Investment banks kicked off coverage today of a small Israeli wireless backhaul firm, Ceragon Networks (NASDAQ: CRNT). The banks generally seem to like it. I see Jeffries, Bank of America and Lehman all with buys on the small firm.

As I see it, there are a couple of issues with the current wireless infrastructure:

• Current backhaul infrastructure in emerging markets cannot handle huge traffic growth
• Because the market is quite consolidated, it's hard for new entrants to penetrate into the industry
• Carriers are looking to deploy fully-IP networks

These dynamics bode well for Ceragon, which commands about a 10% market share in its niche. Ceragon is a pure-play in the wireless backhaul and stands to benefit from robust growth driven by expansion into new markets and increasing use of data applications. The company also white-labels its products to sell through Nokia (NYSE: NOK). This dependence, while a boon for the company and helps to contribute to 35% yearly growth estimates, also entails risk as the global wireless powerhouse has been a 10% customer for the past few quarters.

"We believe that the proper comparables for Ceragon [are] those vendors directly competing in the wireless backhaul space, along with the broader communications equipment universe that service the carrier channel," the Lehman Brothers initiation report on the company said. "Given the company's revenue growth dynamics and exposure to wireless data growth, we believe that Ceragon should trade at a premium to wireless backhaul providers and legacy, lower growth vendors in the carrier channel." Lehman put a $16 price target on the firm.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in the stocks mentioned above.

Ceragon Networks (NASDAQ: CRNT) provides microwave transmission terminal hardware and network management software that enable wireless service providers to deliver voice, Internet browsing, music and video applications. The firm's systems are used by more than 150 service providers and hundreds of private networks, in 85 countries. Ericsson (NASDAQ: ERIC) is a major competitor.

Investors were pleased earlier in the week, when the company reported Q3 EPS of 13 cents and revenues of $44.5 million. The Street had been looking for 12 cents and $39.3 million. Management also guided FY07 revenues to about $159.4-$162.6 million, versus Street consensus of $151.76 million. Broadpoint Capital subsequently reiterated a "strong buy" on the stock and declared a price target of $25. RBC Capital Markets reiterated an "outperform" and declared a $22 target. The stock popped on the news and then passed into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.