This Just In: Upgrades and Downgrades

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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 ...
Up until a few weeks ago, if you had asked anyone: "Who's got the sharpest investing minds on Wall Street?" the answer would undoubtedly have come back: "Why, Goldman Sachs (NYSE: GS), of course." But times, they are a-changin'. When Goldman Sachs downgraded Boeing (NYSE: BA) to "sell" back in June, it cost the stock 5.5% of its market cap in a trice. So you can imagine what happened when Goldman downgraded the stock to "conviction sell" yesterday.

Boeing gained 1%. And another 1% so far today.

Dude, where's Goldman's Street cred?
So it seems investors aren't thinking Goldman's "all that" anymore. But why?

Personally, I suspect it has something to do with the total disconnect from reality inherent in Goldman's Boeing downgrade. According to the analyst, "Aerospace companies have yet to capitulate to current market conditions implying downside to company guidance and consensus estimates."

Which may come as a surprise to shareholders of:

• Lockheed Martin (NYSE: LMT), whose stock has dropped 24% over the past year.
• Alliant Techsystems (NYSE: ATK), down 30%.
• Northrop Grumman (NYSE: NOC), which has lost 43%.
• General Electric (NYSE: GE), which is skimming the hedgerows at a 52% loss.
• Textron (NYSE: TXT), plowing under said hedges after plummeting 75%.

So sure, Boeing isn't as far down as some of the other companies operating in the aero-space, but its own 46% tumble seems pretty darn capitulatory to me.

How cheap is cheap?
Meanwhile, Boeing shares trade for a measly 10.5 times earnings, despite consensus projections that the company will grow its profits at better than 11% per year over the next five years. Consider this:

• Trailing earnings were depressed by the company's recent labor strike.
• The strike is now over.
• And Boeing now has years and years worth of plane orders in the bag, waiting to be fulfilled at a profit.

Goldman's suggestion that this is the time to "sell into the strength from the resolution of the machinists union strike" seems ill-considered at best.

Caveat investor
At Motley Fool CAPS, we track the comings and goings of nearly 170 professional stock pickers. I can tell you how good JP Morgan is at picking stocks. I can give you the lowdown on Bank of America. Heck, if you're interested in someone as esoteric as Credit Suisse or even Barclays -- we've got you covered.

For all its lack of logic, I'd be willing to give Goldman's advice more credence if the analyst depended less on its reputation for, and more on its record of, brilliance in its stock picks. If, say, it reported its ratings to briefing.com like everyone else, so that we at CAPS could track that performance and confirm that Goldman's really as smart as it thinks it is.

Until that happens, though, I'm forced to work with what we've got: an analyst:

• lacking a trackable record of success (via briefing.com-fed CAPS data);
• making an on-its-face incorrect statement that the aerospace industry hasn't "capitulated";
• and making a decision to sell an apparently cheap stock.

So sorry, Goldman. But if that's all you've got, I've got to disagree with you on this one. Boeing's still a buy in my book.