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 worst ...
Seagate (NYSE: STX ) shareholders received a belated Christmas gift from analysts at Broadpoint AmTech this morning, but they might want to check the deadline on returns.
Despite predicting a slide in computer hard drive prices that it expects to continue for several months, AmTech argues that the stock is now fairly valued based on moves made of late by both Seagate and No. 2 rival Western Digital (NYSE: WDC ) . Specifically, both companies have announced cuts in their capital spending (foreshadowing a slowing in capacity expansion); both companies also stopped production for "several weeks" in December; and finally, Western Digital has been laying off employees. All of which argues in favor of supply side support for hard drive prices once this "rationalization" of capacity takes hold.
Let's go to the tape
Logical? Sure sounds like it, but investors should take note that AmTech's record in accurately predicting the future leaves something to be desired. Paired up with Broadpoint Securities since October of last year, AmTech now sports a CAPS record of just 42% accuracy on its picks, and is underperforming the S&P 500 by nearly four points per pick.
Nor are recent trends encouraging. Within the computer tech space, a single successful pick stands out in stark contrast to a string of less impressive picks. For example:
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Company
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Broadpoint/AmTech Said:
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CAPS Says:
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Broadpoint/AmTech's Pick Beating (Lagging) S&P by:
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Micron
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Outperform
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**
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39 points
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Applied Materials (Nasdaq: AMAT )
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Outperform
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*****
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(11 points)
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Texas Instruments (NYSE: TXN )
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Outperform
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****
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(13 points)
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Moreover, as AmTech itself points out, there's reason for worry about Seagate even if it is successful in constraining the supply of hard drives. Specifically, AmTech sees semiconductor-based solid-state disk drives (SDDs) posing a "long-term competitive threat" to Seagate's core competency in magnetic-media hard drives (HDDs).
Granted, Seagate is moving in the SDD direction as well. But in contrast to its No. 1 position in HDDs, the company places a distant third, or worse, in SDDs. Samsung holds the lead in this space, placing SDDs in the computer innards of Apple, Dell (Nasdaq: DELL ) , and Hewlett-Packard (NYSE: HPQ ) . And chip expert Intel (Nasdaq: INTC ) has begun shipping SDDs as well.
Foolish takeaway
None of which bodes well for Seagate's strategy shift, or its ability to profit from its market-leading position in what is fast becoming an obsolete technology.
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