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 ...
As the trading week wound down on Friday, and Fools prepared to leave for the weekend, investors in high-wire tech stock American Superconductor (Nasdaq: AMSC  ) received a parting gift: an initiation of coverage, with an endorsement, from Janco Partners. The stock promptly sank 4%. Then it dipped 6% more this morning.

Thanks for nothing, Janco
Why the dismal response to Janco's thumbs-up? It may have something to do with the banker's record.

Janco may not be a lousy analyst, but neither will it be easily confused with Warren Buffett. According to our records, the Colorado banker ranks just below the top quintile of investors, yet it still gets slightly more of its picks wrong than right. A few examples drawn from the alt-energy sphere are illustrative:

Company

Janco Said:

CAPS Says (5 Max):

Janco's Pick Lagging S&P by:

Evergreen Solar 

(Nasdaq: ESLR  )

Outperform

***

20 points

Ascent Solar  (Nasdaq: ASTI  )

Outperform

***

11 points

SunPower  (Nasdaq: SPWR  )

Outperform

**

3 points

So Janco's been laying a lot of bets on alternative energy, but it has few that are paying off. On the other hand, the banker has enjoyed considerable success in the entertainment sphere:

Company

Janco Said:

CAPS Says

(5 Max):

Janco's Pick Beating S&P by:

GameStop (NYSE: GME  )

Outperform

****

77 points

Activision Blizzard

(Nasdaq: ATVID  )

Outperform

****

44 points

Lions Gate (NYSE: LGF  )

Outperform

***

7 points

Unfortunately, aside from the death-defying thrill of watching a storm take down a live wire, integrating wind power into the grid has little to do with entertainment. It's more that Janco has been making a bid to capture investor enthusiasm for all things non-hydrocarbon.

Aside from the broad anti-oil sentiment, though, is there anything else behind Janco's enthusiasm over American Super? Although the company's sales doubled last year, it still has neither profits nor positive cash flow, so I don't see much of a valuation argument to make. Rather, I suspect that Janco is basing its endorsement on one of two things: that the explosive sales growth of yesteryear will continue in 2008 and beyond, or, more modestly, that with more than 40% of the share float sold short, any good news whatsoever could send the stock soaring when it reports its first-quarter earnings.

It may take some time for the first thesis to prove out. But we'll learn as early as tomorrow whether Janco can profit from a short squeeze.

GameStop and Activision Blizzard are Motley Fool Stock Advisor recommendations. Try the market-beating service free for 30 days.

Fool contributor Rich Smith owns no shares of any company named above. You can find him on CAPS, pontificating under the handle TMFDitty, where he's ranked No. 523 out of more than 110,000 players. The Fool has a disclosure policy.


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