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.

Cleanup in aisle negative 5.89
Investors in beleaguered supermarketeer Whole Foods (Nasdaq: WFMI  ) got hit by a one-two-three-four-five series of punches Thursday. First came investors' expected negative reaction to Tuesday's earnings news. But piling right on was a slew of professional Wall Streeters, tripping over one another in their rush to downgrade the stock and slash their price targets. A summary:

• FTN Midwest knocked the stock down to neutral
• Argus Capital dropped its "buy" call to a "hold" rating
• Canaccord Adams cut its price target to $23 from $36, but kept the buy rating
• Oh, and some outfit called "ThinkPanmure" labeled Whole Foods a "source of funds." I'm not sure what that means, but it sounds like these Panmure folk believe the only way to make money off of Whole Foods is to put the money elsewhere.

Between the earnings report and the lobbed rotten (but organic) tomatoes, the stock had fallen nearly 18% -- 17.7%, to be precise.

Rating the raters
Speaking of tomato-tossing, though, perhaps you'd like to know a bit about just how accurate these folks are? Thanks to CAPS, that's not a problem. Voila!

FTN Midwest
Notwithstanding its disastrous endorsement of Whole Foods (up until Wednesday), and a portfolio-wide accuracy rating of just 41%, FTN Midwest has developed a pretty good record picking stores that stock groceries:

Company	FTN Said:	CAPS Says (5 max):	FTN's Pick Beating (Lagging) S&P by:
Dollar Tree (Nasdaq: DLTR  )	Outperform	***	40 points
BJ's Wholesale (Nasdaq: BJ  )	Outperform	***	37 points
SUPERVALU (NYSE: SVU  )	Outperform	***	(3 points)

Argus
Argus, in contrast, has almost no record in groceries -- but that's not its fault. We've been tracking this shop for less than a month. Still, the few calls it has made over the past few weeks are working out quite well in the short term: 57% accuracy; so far, so good.

Canaccord
Canaccord appears to combine the worst traits of the two analysts noted above. Despite ranking in the top 15% of investors tracked by CAPS, Canaccord boasts accuracy not much better than FTN Midwest's -- barely above breakeven -- combined with limited experience in grocery stores.

The closest Canaccord comes is its (currently lagging the market) buy rating on Whole Foods, combined with equally disappointing picks of organic foods manufacturer SunOpta (Nasdaq: STKL  ) and organic foods distributor United Natural Foods (Nasdaq: UNFI  ) . But hey, guys, great call on IBM (NYSE: IBM  ) !

Company	Canaccord Said:	CAPS Says (5 max):	Canaccord's Pick Beating (Lagging) S&P by:
IBM	Outperform	***	50 points
SunOpta	Outperform	*	(48 points)
United Natural Foods	Outperform	***	(7 points)

Food fight
So where does this leave us? We've got one generally terrible stock shop that's terribly good at picking grocers; one apparently decent analyst group lacking much of a track record in CAPS; and one consistently good shop that's just a coin flip away from underperforming the market on any given stock pick -- and that has a tendency to drop the coin off the table when it comes to organic foods. About the only thing they've got in common is that not a one of them is thrilled with Whole Foods today.

To put it mildly, I don't have a lot of confidence in any of these ratings, especially now that the analysts are feeling pressured to "say something" in the aftermath of Whole Foods' earnings report. So allow me to inject a bit of long-term thinking into the debate.

Right now, Whole Foods -- a Motley Fool Stock Advisor recommendation, by the way -- sells for just 18 times trailing earnings. Analysts are running scared, but even so, as a group they still think Whole Foods will grow those earnings faster than 16% per year for the next five years.

To me, these numbers evoke the oft-parroted Buffettism: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." For all its present troubles, Whole Foods remains a wonderful company. After this week's sell-off, Mr. Market is offering investors a chance to own it for a fair price.

Give that offer serious consideration.