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 its worst and sorriest, too.

And speaking of the best ...
By now you've heard the news: French entertainment conglomerate Vivendi aims to deconglomeratize, and then reconglomeratize in new garb -- spinning off its games division and merging it with Activision (NASDAQ:ATVI) to create the world's largest gaming corporation (much to the chagrin of Electronic Arts (NASDAQ:ERTS), which had kind of gotten used to holding that title).

So far, we have only two analysts going on record in the aftermath of the merger announcement. BMO Capital Markets likes the putative new company, and upgraded Activision to "outperform." Wedbush Morgan is less sanguine on the combination, and while it still views Activision positively, downgraded its enthusiasm from "strong buy" to just "buy."  

So who's right here: BMO, which thinks the merger is a good thing for Activision shareholders, or Wedbush, which thinks it's, well, less of a good thing? For clues to the analysts' relative skills at gauging the dynamics, we turn to CAPS for a glimpse at their records.

Let's go to the tape
One of "Wall Street's Best" investing houses, BMO scores a 98.21 CAPS rating on 58% accuracy, thanks in large part to picks like:

In contrast, Wedbush Morgan finds itself near the back of the pack of CAPS players, with a rating of 23.77, and 45% accuracy. Yet look how well it's done in the gaming sector:

Foolish takeaway
Viewed from a distance, this contest isn't even close. In a head-to-head competition, BMO beats Wedbush hands-down for sheer stock-picking prowess across industries. But within the gaming sector in particular, both of these firms boast top-flight analysts who have racked up big gains for their clients.

Another thing the firms share: While their degree of enthusiasm varies, both analysts give the Activision-Vivendi Games merger a thumbs-up. Considering their records of success in this sector, I have to think that bodes well for shareholders.

Do our analysts at Motley Fool Stock Advisor agree? And what does the new "Activision Blizzard" alliance portend for shareholders of Electronic Arts? Both companies are Stock Advisor recommendations, and you can bet your joysticks that avid gamer and Fool Co-Founder David Gardner will have something to say about the deal. Sign up now for a free, 30-day trial of the newsletter.