Analyst Upgrades

• Tiffany (TIF) to outperform from perform at Oppenheimer.
• Kellogg (K) to outperform from market perform at Wells Fargo.
• Citizens Republic (CRBC) to outperform from market perform at FBR Capital.
• Research in Motion (RIMM) to equal weight from underweight at Morgan Stanley.
• MWI Veterinary Supply (MWIV) and Elster (ELT) to overweight from neutral at Piper Jaffray.
• Paetec Holding (PAET) and Patterson-UTI Energy (PTEN) to buy from hold at Citigroup.
• New Gold (NGD) to outperform from market perform at BMO Capital.
• Aviat Networks (AVNW) to buy from hold at Needham.
• Abiomed (ABMD) to buy from hold at Jefferies.
• Animal Health (AHII) to outperform from neutral at RW Baird.
• PNM Resources (PNM) to overweight from neutral at JPMorgan.

Analyst upgrades:

• Citigroup upgraded shares of Lennar (NYSE:LEN) to Buy from Hold on valuation as they believe the recent sell-off on concerns of fraud is overdone. The firm thinks the allegations made by Barry Minkow/Fraud Discovery Institute are unfounded and has an $11 target on shares.
  
• Merriman upgraded Nautilus Group (NYSE:NLS) to Neutral from Sell after meeting with management to reflect increased optimism on the company's turnaround.
  
• Baird upgraded Leap Wireless (NYSE:LEAP) to Outperform from Neutral based on valuation and strong subscriber trends.
  
• Transocean (NYSE:RIG) was added to Goldman's Conviction Buy List.
  
• Pearson PLC (NYSE:PSO) was raised to Neutral from Underweight at JP Morgan.
  
• Smith & Nephew (NYSE:SNN) was lifted to Outperform from Neutral at Credit Suisse.

Analyst downgrades:

• JP Morgan downgraded Bed Bath & Beyond (NASDAQ:BBBY) to Underweight from Neutral and lowered their target to $20 from $26 as they believe potential benefits from the Linens' N Things closing are being overstated and that the risk/reward is unfavorable at current levels.
  
• Keefe Bruyette downgraded Citizens Republic (NASDAQ:CRBC) to Market Perform from Outperform and cut their target to $3 from $7 to reflect the company's lower capital position.
  
• UBS downgraded Energizer (NYSE:ENR) to Sell from Neutral and lowered their target to $40 from $48 citing signs of a battery price war, Wal-Mart's (NYSE:WMT) reduction in space allocation, and the company's cuts in investment.
  
• Chevron (NYSE:CVX) was removed from Goldman's Conviction Buy List.
  
• MetroPCS (NYSE:PCS) was lowered to Sector Perform from Outperform at RBC Capital.
  
• Lincoln Electric (NASDAQ:LECO) was cut to Sell from Neutral at Piper Jaffray.

Analyst initiations:

• Global Hunter believes Pep Boys (NYSE:PBY) is well-positioned to benefit from increased demand for replacement parts and maintenance services as new car purchases are deferred. Shares were initiated with a Buy rating and $5.50 target.
  
• Jefferies started Sanofi-Aventis (NYSE:SNY) with an Underperform rating and sees downside risk to the stock from the potential introduction of Lovenox generics in the U.S.
  
• Merriman assumed Alter Nrg (NYSE:ANRGF) with a Neutral rating and recommends waiting on the sidelines pending increased visibility on the company's gasification projects.
  
• JP Morgan (NYSE:JPM) was re-initiated with a Buy rating at Goldman. Shares were also added to Goldman's Conviction Buy List.
  
• Hudson City Bancorp (NYSE:HCBK) was assumed with an Overweight rating and $15 target at Barclays.
  
• DG FastChannel (NASDAQ:DGIT) was initiated at BWS Financial with a Strong Buy rating and $30 target.

The year 2008 saw a slew of discount M & A (mergers and acquisitions) deals, most of them below book value. Among these were Wachovia and National City. Capital One Financial bought Chevy Chase Bank at .64 times book value.

If you look at the financial landscape for 2009, some names are already popping up for distressed sales, such as Citizens Republic Bancorp (NASDAQ:CRBC), Huntington Bancorp (NASDAQ:HBAN), Midwest South Financial (NASDAQ:TSFG) and Colonial Banc Group (NYSE:CNB).

It seems that we will see a continuation of the purging of bad bank assets in 2009. Banks use a practice of good/bad assets and move their worst assets to a separate company that absorbs the assets' future losses. Then the original bank emerges as a healthier, deleveraged institution.

All of this is taking place under the radar and it is difficult for investors and the public to know which banks are using this practice. When deleveraging becomes unmanageable, the federal government may need to step in and absorb a bank losses to avoid the bank's failure.

Do you believe the financials are a place to invest in 2009?

MOST NOTEWORTHY: Citizens Republic Bancorp, Hess Corp and Sanderson Farms were today's noteworthy upgrades:

• Keefe Bruyette upgraded shares of Citizens Republic Bancorp (NASDAQ: CRBC) to Outperform from Market Perform on valuation following yesterday's sell-off, which they attribute in part to its removal from the Dow Jones Select Dividend Index. Shares were also raised to OUtperform from Perform at Oppenheimer following the sell-off.
  
• Goldman upgraded Hess (NYSE: HES) to Buy from Neutral citing the company's leverage to higher oil prices. The firm said oil is likely to hit $150-$200/bbl in the next 6-24 months.
  
• Stephens upgraded shares of Sanderson Farms (NASDAQ: SAFM) to Overweight from Equal Weight as they expect industry fundamentals to improve in FY09.

OTHER UPGRADES:

• Baird raised Stellent (NASDAQ: STEL) to OUtperform from Neutral.
  
• Friedman Billings upgraded Preferred Bank (NASDAQ: PFBC) to Market Perform from Underperform.
  
• Agco (NYSE: AG) was upgraded at Goldman to Buy from Neutral.
• Lehman upgraded SLM Corp (NYSE: SLM) to Overweight from Equal Weight.