What do you think? (For serious investors)?

Morgan Stanley just downgraded SAI (Science Application Inc) to to underweight from equal-weight. Their reasoning: concerns over an increasingly unfavorable political environment. -- "As the war funding debate between Congress and the Bush Administration intensifies, the risk of reduced funding for federal IT initiatives grows

Couple of issues with this:
1) SAI annouces their earnings 11 April (So why downgrade 6 days prior to an earnings call without seeing how the company is performing revenue wise?)
2) Morgan Stanley has about 7 milliion shares with SAI. (So why downgrade stock they have a stake in? Isn't this rare for an investment institution to do so?)
3) Their explanation doesn't hold water. (The likelyhood that defense spending would be shorted is highly unlikely even if we were to pull out of Iraq immediately)

Does this sound strange? Anyone? I have my suspicions. But give me your thoughts?

Don't put too much stock (no pun intended) into upgrades and downgrades. John Deere Corp got downgraded earlier this week because of the increased demand for soy which doesnt need machines to harvest, which will affect Deere's bottom line. Seriously, that was the reason.

If you like the company, then by all means trust yourself.

I like Morgan Stanley and I am one of those people that doesn't buy into all these conspiracy theories, but in my opinion, they might have downgraded it just to get people into more shares before they report a great quarter, thus making everyone money in the long term.

So pretty much, take it all with a grain of salt.

1) Earnings are NEVER a mystery, unless you didn't look.

2) MorganStanley would rather lose a tiny bit of cash than get caught lying!

3) Watch this space. If you SINCERELY believe the risk of a defense spending reduction is zero, do I have some land in Florida to sell you!

First, I don't know squat about SAI. If MS has a position in SAI, maybe they would like to increase their position more, and a nice downgrade might give them a window to purchase more at a reasonable price. Just a thought.

Looking foreward, the political situation does indeed not look that good going foreward. Heck, the country is bankrupt now.

You mean buying on a dip before they beat revenue expectations?

It is entirely possible. You can't rely on these analysts for your own interests.

Like they did last earnings, there may very well be a huge upside and possibly further guidance.

I don't know the company well enough to comment further, but I think your line of reasoning holds water.

http://www.silentwinners.com

It is likely Morgan Stanley sold all their shares before they downgraded.

You are aware those numbers are old, right?

I did sold short SAI today (04-05-2007)

I am a Portfolio Manager with over a decade of experience in the Stock Market.

First, I want to make something clear... it is impossible that MS sold all their SAI shares today. That is just absurd in many ways, just to mention a few:

a. only 2.8 million shares of SAI transacted today
b. if any inv. company sold such a huge position (> 7 million shares) at once it would reflect enourmously on the stock price
c. the transaction costs for such a transaction are enourmous, unless there is a clear risk that the stock is going to tank heavily.

Ok, sorry for diverging....

1. Inv. companies have analysts tracking the companies and they usually read an interpret management in certain ways. It is very probable that MS interprted a negative guidance from the company and in conjuction with their financial analysis (outlook) decide that it was best to advice their clients to sell the stock now, rather than in 6 days when they announce earning (which by the analyst interpretation could be awful and have a larger impact on stock price).

2. The inv. adcisory service that MS offers has to be independant from any other part of the firm (regardless of the economic interest). There is a HUGE scrutiny by the SEC into this companies, therefore lying to protect their economic benfits is not worth it. The costs associated with a SEC investigation or missrepresentation greatly outweight the benfits on making some money on the SAI shares...greatly!!!!

3. is a tough one, many times the real reasons an analyst downgrades a stock is not disclosed but hiden among all their wording. As you know MS has many business opportunities with SAI (M&A, IB and others), therefore they don't want to trow all the trash out to the street (unless is obvious).

Overall, is not industry strange, it happens again and again.... i guess that is what you get for have companies with so many interest....

As a previous poster mention, the investors objectives a re many times miss aligned with the inv. company...

Hope this help, :)

1) analysis ratings are looking ahead one year, not 6 days.
2) Brokerage/investments houses used to say one thing and do another (downgrade, and hold waiting to buy more cheaper, or selling while upgrading). The SEC found out and fined them many millions of dollars. Now there must be a "Chinese wall" between the bankers and the analysis. Or analysis must employed by an independent company.
3) no comment.