Get to Know a Guru

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." In our recurring column, "This Just In," we cover the most headline-worthy upgrades and downgrades, testing the analysts' logic and examining their records to help you decide whether they're worth listening to at all. And in "Get to Know a Guru," we use upgrade and downgrade news as a springboard to introduce you to some of the lesser-known names in analyst-land. Up this week: First Analysis.

Profiles in punditry
First Analysis Securities upgraded shares of for-profit educator DeVry (NYSE:DV) to "overweight" yesterday. Far from the impolite remark it sounds like, this was actually an endorsement of the shares -- a "buy rating" if you will. According to the analyst, DeVry's investments in providing for-profit education to the high school set offer the prospects of improved operating margins and rising enrollment. First Analysis also likes that DeVry has been buying back stock and that, unlike most of its for-profit educating peers, DeVry pays a dividend.

Sounds reasonable, but even after reading First Analysis' reasoning, we're left with the question: "Um, who the heck is First Analysis?" Here at the Fool, we haven't really noticed the firm since the Bubble era, and didn't pay it much attention even back then. Fortunately, with the advent of Motley Fool CAPS, our project to rate the stocks and rate the analysts who rate the stocks while we're at it, we now have an incentive to pay attention to this little-known player in the stock research world.

Here's what CAPS has to say about First Analysis: "First Analysis Securities is a research-driven investment organization offering financial products and services to both private and public companies. Their research strategy attempts to achieve broad, deep and long-term domain expertise in the sectors under coverage. First Analysis has 20 research-focused investment professionals who focus on the following industry sectors: outsourced services, information technology and chemistry-enabled businesses."

Are these guys any good?
But enough about the firm's biography. What we really want to know about is its resume. When First Analysis speaks, should investors listen?

As a matter of fact, yes, you should. Turning to Motley Fool CAPS to examine the firm's track record, we learn that First Analysis boasts a respectable 88.23 CAPS rating. Granted, that's subject to change -- and could change dramatically in a hurry, given that we're working with limited data (just 15 up or down ratings made public over the last 10 months.) Still, First Analysis' impressive achievement of 73% accuracy is commendable.

In addition to being a quality shop overall, when First Analysis speaks about DeVry in particular, you should listen closely. Visiting the firm's website, I discovered that the two analysts responsible for the for-profit education sector are also responsible for the bulk of the firm's best picks to date:

Meanwhile, the more notable goofs were made by analysts who do not appear to be directly responsible for tracking DeVry:

Foolish takeaway
This is important enough to bear repeating: With only 15 ratings to its name, our CAPS evaluation of First Analysis has to be taken with a couple of grains of salt. We're not dealing with a several-hundred-ratings-per-year shop like Matrix or JPMorgan here. First Analysis picks its battles carefully -- and while on the one hand that's helped it achieve a stellar record, losing just an extra skirmish or two could torpedo its rating.

That said, a stellar record's a stellar record, and the two guys in charge of yesterday's DeVry rating deserve the kudos they've earned. I'd listen to them on this one.

Who else is good? Motley Fool Hidden Gems, where we've picked one winning for-profit educator already, and watch-listed another. Learn who Tom and the gang think is head of the class in profitable education, when you claim your free 30-day trial to the newsletter.  

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. 460 out of more than 30,000 raters.