Get to Know a Guru

In our recurring column, "This Just In," we cover some of the hottest stocks and the most headline-worthy upgrades and downgrades in the market. But we also go behind the scenes, testing the analysts' logic and shedding light on their performance, to help you decide whether they're worth following.

Today, we'll do something a little different. Using upgrade/downgrade news as a starting point, we'll introduce you to some of the lesser-known names in analyst-land. Up this week: Hilliard Lyons.

Profiles in punditry
Wednesday morning, an unfamiliar name (to me, at least) popped up on MSN Money's daily list of analyst upgrades and downgrades. Hilliard Lyons upgraded the stock of consumer- and medical-products giant Johnson & Johnson (NYSE:JNJ) from a cautious "long-term buy" to a clean "buy" rating. As upgrades go, this one had funny timing, coming on the heels of an announcement that J&J partner Icagen (NASDAQ:ICGN) just flubbed a late-stage clinical trial for its sickle-cell anemia drug "senicapoc," which failed to show efficacy in reducing pain in sickle-cell patients.

Why might Hilliard Lyons consider this a positive event? For that matter, who exactly is Hilliard Lyons? At Motley Fool CAPS, we've been tracking the firm for a few months now. Here's what we know:

"A full-service investment firm, Hilliard Lyons aims to help individuals reach their investment objectives. The research team within Hilliard is geared toward long-term investment opportunities and companies offering niche products or services. Analysts focus on the following industries: banks, REITs, technology, health care, pharmaceuticals, specialty chemicals, utilities, telecommunications providers, entertainment and leisure."

Digging deeper, we learn that Hilliard Lyons, while perhaps not a household name, has been around quite a while. It set up shop in Kentucky more than 150 years ago; today, it operates 75 offices in about a dozen states. As a subsidiary of financial powerhouse PNC Financial (NYSE:PNC), it's got a pretty strong backer, too.

Are these guys any good?
So much for the firm's biography -- what we really want to know about is its resume. When Hilliard Lyons speaks, should individual investors listen?

The firm's record on CAPS is inconclusive. Based on the 21 stock recommendations we're tracking, we've got Hilliard Lyons scoring just 65.74 -- far behind the best Wall Street firms, and behind a good 8,700 other CAPS players, lay and professional. That said, Hilliard does a decent job of picking winners, with an even 60% accuracy rating. Some of its better picks to date include:

Then again -- much to its chagrin, I imagine -- Hilliard's also picked:

In my opinion, the firm seems capable of picking modest winners, but its missed calls tend to disproportionately outweigh its good ones. Unfortunately for its clients, Johnson & Johnson provides a case in point here. It's the third-to-worst Hilliard pick we're tracking; since receiving the "long-term" thumbs-up back in October, the stock has managed to underperform the market -- and lower Hilliard's CAPS rating -- by a good 12 percentage points.

Will doubling down on J&J repair the damage that pick has already wrought to Hilliard's reputation? We certainly hope so. After all, Johnson & Johnson is a recommendation of our own Motley Fool Income Investor newsletter.

Who's doing better than Hilliard at predicting Johnson & Johnson's performance? Who's -- truth be told -- doing even better than we are? Click on over to CAPS, to learn who's got the single best record on Johnson & Johnson to date.

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 60th out of well more than 25,000 raters. The Fool has a disclosure policy.