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 ...
A pair of conflicting analyst ratings whipsawed shareholders of digital video recording pioneer TiVo (Nasdaq: TIVO  ) over the last 24 hours. On Tuesday, SMH Capital advised investors to sell the stock, arguing that the share price fully reflects the firm's prospects, and that: "There are simply better places within our media/entertainment universe to put loose money to work." Down went the shares, 7%.

But this morning, Bear Stearns begged to differ, arguing that new content, features, and marketing all have the potential to improve TiVo's earnings, and upgrading the shares to "outperform." Back up went the shares, this time by 5%.

How should investors make sense of this analytical rendering of "Dueling Banjos"? By examining the firms' respective records, and figuring out who's got the smartest analysts.

Let's go to the tape
That's where CAPS comes in. You see, we track both of these brokers on CAPS, and measure their genius against the minds of nearly 29,000 other raters -- both professional Wall Streeters, and individual investors like you and me. What we've found is that, when you get right down to it, SMH knows what it's talking about. Bear doesn't.

With a sterling 93.50 CAPS rating and a record of making right calls more than 56% of the time, SMH may not be the best stock picker in the business, but it's a far sight better than Bear Stearns. Bear's 76.38 rating doesn't even earn it the title of CAPS All-Star -- a title shared by nearly 6,000 investors on CAPS, precious few of which run investment banking firms. And its 45% accuracy rating means you're better off flipping a coin then listening to Bear's grumbling.

Taking a sampling of each firm's past picks, we find:

SMH Says:

CAPS Says:

SMH's Pick Beating / (Lagging) S&P by:

Buffalo Wild Wings (Nasdaq: BWLD  )

Outperform

****

50 points

DirecTV (NYSE: DTV  )

Outperform

****

24 points

Lions Gate (NYSE: LGF  )

Outperform

***

(4 points)

Meanwhile:

Bear Says:

CAPS Says:

Bear's Pick Beating / (Lagging) S&P by:

U.S. Steel (NYSE: X  )

Outperform

***

29 points

Merck (NYSE: MRK  )

Outperform

***

15 points

Amgen (Nasdaq: AMGN  )

Outperform

****

(29 points)

Playing with fire
I'm taking a bit of a risk here, siding with SMH over Bear -- not because Bear is Bear, mind you, but because Bear is bullish on a stock that our very own Motley Fool Stock Advisor has endorsed.

That's right -- if you can remember back this long, we, too, added TiVo to the Fool portfolio way back in July 2003 -- but it's a pick most of us would rather forget. Over its nearly four years in the portfolio, TiVo's managed to underperform the S&P 500 by a whopping 90 percentage points, making it one of the biggest losers in our portfolio.

Maybe Bear thinks it's time TiVo started turning things around. I disagree. Over the last decade, TiVo has managed to cost its shareholders more than $1 billion in net losses. No analyst I know of thinks the company will earn a profit this year or next. Add in TiVo $26 million-per-year cash burn, and I see little reason for these shares to rise.

So for my part, I agree with SMH -- with a twist. There are indeed better places to put your money than TiVo stock. In fact, we've got dozens of them in the Stock Advisor portfolio alone. TiVo may have lost us money, but it's one of the few losers in a portfolio that has walloped the S&P 500 by an average of 35 points since inception. If you're looking to delete TiVo, and record some better profits, take a free trial of Stock Advisor and view a few of the winners we've got saved for you.

Looking for a second opinion? Or in this case, a fourth or fifth? Check out TiVo's CAPS page, and see what the current score leader on the stock has to say about it.

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 No. 1,261 out of nearly 29,000 raters. Buffalo Wild Wings is a Hidden Gems recommendation. The Fool has a disclosure policy.


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Related Tickers

10/24/2014 4:00 PM
TIVO $12.79 Down -0.04 -0.31%
TiVo CAPS Rating: *
AMGN $147.26 Up +0.01 +0.01%
Amgen, Inc. CAPS Rating: ****
BWLD $135.40 Up +6.40 +4.96%
Buffalo Wild Wings CAPS Rating: *****
DTV $84.15 Down -0.28 -0.33%
DirecTV CAPS Rating: ***
LGF $33.00 Up +1.65 +5.26%
Lions Gate Enterta… CAPS Rating: ****
MRK $57.61 Up +0.98 +1.73%
Merck & Co., Inc. CAPS Rating: ****
X $36.92 Up +0.16 +0.44%
United States Stee… CAPS Rating: ***

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