This Just In: Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and worst and sorriest, too.

And speaking of the best ...
If investors generally over-rely on Wall Street's oft-conflicted analysts to tell them "what looks good," then I'll bet investors in foreign stocks lean even more heavily on such advice. After all, if you own shares of McDonald's, while you may defer to Citigroup's opinion on the shares, you also have the option of walking into a few franchises to see for yourself how business is going.

Not so when you invest in Income Investor recommendation France Telecom (NYSE:FTE). Aside from, say, randomly dialing Marseilles, you have little opportunity for independent verification. You're at the mercy of the analyst, relying on its reputation for giving good advice.

That brings us to Credit Suisse, which fears that rivals Iliad or Noos Numericable may bid for a mobile license in France and begin competing with France Telecom for its lucrative cell-phone customers. The mere possibility had Credit Suisse downgrading France Telecom's stock to "underperform" yesterday. (One shudders to think what Credit Suisse may do if that worry becomes fact.) Having heard what Credit Suisse has to say, we now must ask: Does Credit Suisse know what it's talking about?

In Motley Fool CAPS, we learn that Credit Suisse has an overall rating of 93.76, putting it in the top 10% of CAPS players. "Super," you say, "But how well does it know telecom in particular?" To find out, I pulled a few relevant picks from its record on CAPS, and I was surprised to see the following:

Not impressed yet? It gets worse:

As it turns out, telecom-related stocks are not exactly Credit Suisse's forte. Although the bank doesn't tend to make absurdly bad calls within this sector, it doesn't make particularly bright predictions, either. In fact, Credit Suisse picks more losers than winners.

My conclusion (tentative, and with the caveat that I could be proven entirely wrong on this) is that Credit Suisse overreacted to a risk yesterday. That risk may not materialize, and even if it does, it may not be as significant as the bankers fear.

Of course, as investors stranded on the wrong side of the pond from France Telecom, it's hard for us to speak with authority on the company without spending significant time studying its competitive landscape. Fortunately, at Motley Fool Income Investor, lead analyst James Early does have that kind of time, and he keeps our members up to speed on the latest developments at France Telecom. To learn what James thinks of the company and its prospects, claim your free trial to the service now.

And after you've read James' thoughts, get yourself a tiebreaker viewpoint by clicking over to our CAPS page on France Telecom. There you can read what the top-scoring investor has to say about this stock -- also for free.

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 167th out of nearly 28,000 raters. Vodafone is an Inside Value pick. The Fool has a disclosure policy.