This Just In: Whither NVIDIA

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades and downgrades -- sometimes on the same stock, within days of each other. As such, it may look a bit odd for us to spotlight some of the hottest analyst upgrades and downgrades of the hour. After all, the merest pronouncement from a big-name firm can send the market scrambling to make that analyst's prediction come true -- in the short term, anyway. But the analyst's record over the long term is far more significant. That's what we'll focus on in this column, with a little help from our Motley Fool CAPS community intelligence service.

Meet another of Wall Street's best
Yesterday, investment-banking powerhouse Lehman Brothers (NYSE:LEH) downgraded the stock of gaming-graphics guru NVIDIA (NASDAQ:NVDA) to "equal weight" from "overweight." According to Lehman, NVIDIA has grabbed about all the market share it can from rival ATI Technologies, now part of AMD (NYSE:AMD). Furthermore, Lehman thinks "the chipset business is likely to pause in early 2007 until Intel-based (NASDAQ:INTC) chipsets are launched."

Fair enough. I have my own doubts about whether things have really peaked -- considering how slowly the world's console manufacturers have been producing their latest offerings, I suspect there's still a fair amount of pent-up demand out there. But hey, you don't get to be a globe-striding investment bank without knowing a thing or two about business, right? Maybe Lehman's right, and I'm wrong. Let's examine the company's record and find out.

Lehman started off on the wrong foot with NVIDIA. Initiating coverage in April 2005 with an "underweight" (read "sell") rating, the firm encouraged investors to pass on a stock that went on to rack up 135% gains over the next 11 months (versus just a 12% gain for the S&P 500). Lehman soon corrected its mistake, however, shifting its rating upwards to "overweight" in March 2006. About time. This one worked out much better for the bankers, as NVIDIA went on to crush the market yet again, rising 22% (versus 11% for the S&P) through yesterday's downgrade to "equal-weight" (i.e. neutral).

Moreover, Lehman has a generally decent record. Reviewing its performance on CAPS, we see that the firm's combined rating of 95.82 puts it in the top 5% of stock-pickers. Aside from NVIDIA, here are a couple of the companies that have helped to earn Lehman the coveted status of All-Star in CAPS:

And a couple that have held the firm back:

Overall, Lehman looks like one fine stockpicker, though its record in chip stocks -- the NVIDIA call two years ago, and AMD as well -- is a bit mixed. Perhaps on this one, you're better off following the advice of the Fool's own David Gardner. As Lehman was telling people to sell NVIDIA, David was encouraging members of Motley Fool Stock Advisor to buy. Those who listened to David are sitting on an even 200% gain today.

Who else knows NVIDIA, you ask? At CAPS, the lead scorer on the company isn't an investment bank, or a professional Fool, either. To learn who he (or she?) is, and his (her?) thoughts on the company today, just click here.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 21 out of more than 21,000 raters.