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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 track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
Texas Instruments
(NYSE: TXN  ) shareholders got a bit of a shock yesterday from Brigantine Advisors' sudden broadside. After racking up 22 points worth of market outperformance in CAPS, Brigantine decided to "call it a year," and ended its TI pick early -- pulling its buy rating, and knocking the stock down to neutral. Judging from the market's reaction, investors are shrugging off the assault. But why did Brigantine turn on TI in the first place?

Actually, the news here isn't so bad. According to Brigantine, a strong three-month run has lifted TI to "within striking range of our $33 target ... one of the strongest performers among its peers."Accordingly, "we are taking our foot off the gas-pedal and downgrading to a Hold."

So in essence, TI became a victim of its own success. Brigantine's simply acknowledging that success, declaring victory, and heading home. In this case, it's exactly right. Texas Instruments' stock is totally played out, overpriced, and doomed to sink.

Let's go to the tape
I know Mr. Market disagrees with me on this one. Texas Instruments shares rose yesterday, despite the downgrade. They're floating higher today as well. Some will ascribe that to the iffiness of Brigantine's reasoning.

Over the three-month time period during which the analyst says TI has been "one of the strongest performers," it's true that TI beat Intel's (Nasdaq: INTC  ) relatively dawdling 19% gain. But the stock actually underperformed such big-name semis as Advanced Micro Devices (NYSE: AMD  ) and NVIDIA (Nasdaq: NVDA  ) , up 27% and 50%, respectively.

Other investors will point to Brigantine's generally checkered past in the semiconductor industry as reason to ignore the analyst's advice. They're not wrong: Brigantine's picked as many losers as winners in the semiconductor industry:



Brigantine Said:

CAPS says:

Brigantine's Picks Beating (Lagging) S&P By:

Broadcom (Nasdaq: BRCM  ) Outperform *** 55 points
Brooks Automation (Nasdaq: BRKS  ) Outperform **** (14 points)
Atheros Communications (Nasdaq: ATHR  ) Outperform **** (22 points)

Brigantine's 50% record for accuracy in semis is certainly not the kind of thing that will inspire investors to follow its lead. But -- newsflash! -- this time it's right on the money.

Selling for 14 times earnings, and paying a tidy 1.6% dividend, Texas Instruments isn't exactly the most expensive stock on the planet. But it's looking a mite pricey relative to consensus expectations for 10% annual earnings growth over the next five years.

Even worse, if you dig into the company's cash flow statements, you'll find that TI's reported income overstates the firm's free cash flow by a sizeable margin. Actual free cash flow backs up barely 75% of the company's reported "profit" under GAAP. As a result, this company sells for a price-to-free cash flow ratio of more than 17 -- much too high for a purported 10% grower.

Foolish final thought
Texas Instruments is a fine business. I've recommended the stock in the past (quite successfully, I might add). I'm almost certain to do so again in the future -- at the right price.

But we're not getting that price today. My advice: When Brigantine tells you to disembark this ship, heed its good advice.

Intel is a Motley Fool Inside Value recommendation. NVIDIA is a Motley Fool Stock Advisor pick. Atheros is a Motley Fool Hidden Gems recommendation. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Atheros and Texas Instruments.

Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 623 out of more than 170,000 members. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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