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.
Speaking of the best...
Trading house Lazard Capital, heir to the storied Lazard Freres & Co. name, went on a bit of a buying binge yesterday. Initiating coverage on the solar power industry, it ran madly around the equity markets, seemingly slapping "buy" ratings on every company it could find in this space.
That's right, folks. Whether it was Energy Conversion Devices
But the madcap, devil-may-care nature of Lazard's endorsements got me wondering: If overly negative analysts are often guilty of throwing babies out with bathwater, might a frenetically enthusiastic Lazard have done something equally bad yesterday? Might one or more of these "babies" have a face only an IPO underwriter could love? To backtest Lazard's ability to pick the cutest li'l stocks on the planet, we turn to Motley Fool CAPS to tell us just what kind of record Lazard has racked up.
There we learn that like a doting nanny, this firm often loves too much, and too forgivingly. Out of the 80 Lazard picks we've recorded since CAPS went live in the middle of last year, just one in 10 represents an "underperform" call. More's the pity, because in seven of the eight times that Lazard showed the intestinal fortitude to call out a bad stock, it was proven right. In contrast, nearly every pick that's currently losing to the market carries a "buy" rating from Lazard.
For example:
|
Lazard says: |
CAPS says: |
Lazard's pick lagging S&P by: |
|
|---|---|---|---|
|
Amgen |
Outperform |
**** |
21 points |
|
Celgene |
Outperform |
*** |
9 points |
|
Genentech |
Outperform |
*** |
6 points |
What's it mean to you, the investor? For one thing, it means that a company has to be really bad to earn a thumbs-down from Lazard. When these guys say something's a "sell," run away screaming. The other lesson: Take Lazard's endorsements with a grain of salt. When it says "buy," remember that with its 47% accuracy rating, Lazard is more often wrong than right.
Fortunately, at Motley Fool CAPS, you don't need to lean on one analyst's questionable record of success for advice. With well over 24,000 rated lay and professional investors working together to understand the market, you can always find a more informed opinion when you need it. In fact, CAPS has identified the "score leaders" for each of the four solar power companies named above. To learn their identities, click through to:
You may be surprised to learn that for three of these companies, the score leader is no professional analyst, but a lay investor, just like you and me.
Oh, and lest I forget -- the folks over at Motley Fool Rule Breakers have identified one superb prospect in the field of solar energy that Lazard seems to have missed. To learn the name of this mystery stock, you simply need a free trial of the service. Claim yours now.
Fool contributor 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 23 out of more than 24,000 raters. The Fool has a disclosure policy.
