Analyst Upgrades

• FBR Capital upgraded Adobe Systems (ADBE) to outperform from market perform to reflect valuation following the recent pullback in shares, as well as the upcoming release of the company's CS5 product. The firm raised its price target for the stock to $39 from $36.
• Keefe Bruyette upgraded Zenith National (ZNT) to market perform from underperform following the company's merger agreement with Fairfax Financial. The firm thinks the offer is a strong price to receive for Zenith National shareholders.
• Kaufman Bros. upgraded Infosys (INFY) to buy from hold as it believes the offshore applications outsourcing market is picking up. The firm raised its target price for shares to $67 from $58.
• Ventas (VTR) was upgraded to buy from neutral at BofA/Merrill.
• Liz Claiborne (LIZ) was upgraded to buy from hold at KeyBanc.
• iStar Financial (SFI) was upgraded to hold from sell at Citigroup.

MOST NOTEWORTHY: Texas Instruments, SanDisk and Brocade were today's noteworthy downgrades:

• Merrill Lynch downgraded shares of Texas Instruments (NYSE: TXN) to Neutral from Buy after the company reported lower-than-expected Q3 results due to concerns regarding elevated inventory levels and rising raw material and labor costs. Merrill lowered their target to $27 from $32.
  
• Citigroup cut SanDisk (NASDAQ: SNDK) to Sell from Hold after the company reported a Q2 miss and offered lower-than-expected guidance. Citigroup lowered their target price to $14 from $20.
  
• JMP Securities downgraded Brocade (NASDAQ: BRCD) to Market Perform from Outperform following the company's announcement to buy Foundry Networks, Inc. (NASDAQ: FDRY) for $19.25 per share.

OTHER DOWNGRADES:

• ArthroCare (NASDAQ: ARTC) was lowered to Market Perform from Outperform at William Blair.
  
• JP Morgan downgraded Assured Guaranty (NYSE: AGO) and Lenovo Group (LNVGY) to Neutral from Overweight.
  
• iStar Financial (NYSE: SFI) was downgraded to Sell from Buy at UBS.
  
• Goldman removed Gilead Sciences (NASDAQ: GILD) from the Conviction Buy List.

A number of leading financial newsletter advisors -- including Mark Skousen, Bryan Perry, Daniel Frishberg, and Neil George -- have recently taken positions in specialty finance and mortgage lending stocks, sectors that had suffered from the "meltdown" in the subprime mortgage market.

Mark Skousen, in his The Hedge Fund Trader, notes, "Mortgage lenders are making a comeback." The recent price recovery, he notes, has been broad ranged, covering most thrifts and mortgage trusts. He notes, "It appears that investors have concluded that the subprime lending scandal was limited."

iStar Financial (NYSE: SFI), he states, is his favorite commercial REIT. In fact, it was a recent announcement from iStar that acted as a catalyst for an improvement in the overall sector.

He explains, "California savings & loan Fremont General Corp. (NYSE: FMT) announced that it would sell its commercial real estate lending business to iStar Financial for about $1.9 billion. With Fremont expecting now to survive its subprime mortgage woes, many now consider the real estate industry recovery to be real."

Skousen also points to strong insider buying of shares in thrifts and mortgage banks.

MAJOR PAPERS:

• Vonage Holdings Corp (NYSE: VG) said bankruptcy is one of the potential risks from its continuing patent litigation with phone giant Verizon Communications Inc (NYSE: VZ), reported the Wall Street Journal.
• Blackstone Group is selling Extended Stay Hotels to Lightstone Group for $8B, which beat offers from Fortress Investment Group (NYSE: FIG) and Goldman Sachs Group Inc (NYSE: GS), according to the Wall Street Journal.
• The Wall Street Journal reported that other financial firms such as Countrywide Financial Corporation (NYSE: CFC), CIT Group Inc (NYSE: CIT), iStar Financial (NYSE: SFI), and KeyCorp (NYSE: KEY) may be in play after the sale of Sallie Mae (NYSE: SLM).

OTHER PAPERS:

• The Telegraph reported that General Electric Company (NYSE: GE) is looking to sell a natural gas power plant in the UK for an estimated GBP450M-GBP500M, with potential buyers including E.ON AG ADS (NYSE: EON) and Scottish Power ADS (NYSE: SPI).
• The New York Post has learned that Heather Pech, a senior Jones Apparel Group Inc (NYSE: JNY) executive that headed the Nine West retail chain, has left the company.

WEBSITES:

• WNBC.com reported that Research in Motion Limited's (NASDAQ: RIMM) Blackberry service is suffering a massive system failure since last night.