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 worst and sorriest, too.

And speaking of the best ...
While I wouldn't exactly call it "the best," megaretail banker Wachovia scores a bit better than average on CAPS, boasting a 65.79 CAPS rating despite getting its picks right less than half the time. That said, I suspect the firm will get a bit of a boost to its reputation as a result of the upgrade it made this morning. Hiking Motley Fool Rule Breakers biotech recommendation PDL BioPharma (NASDAQ:PDLI) to "outperform" seems almost certain to win the banker at least a few points.

Why? Well, if you subscribe to Rule Breakers, you already know the story. But for those who aren't yet members (rectify that situation with a free trial), here's a quick sketch of the situation at PDL: The company has underperformed for some time now, and recently suffered the indignity of being forced to pull its Nuvion drug from clinical trials, based on lackluster results. Activist investor Third Point used the company's troubles as ammunition in arguing for the ouster of PDL's CEO, as well as the firm's sale -- and it appears to have succeeded on both fronts. Yesterday afternoon, PDL announced that not only is the CEO stepping down "effective immediately," but that the board "has recently decided to actively seek offers for the sale of the company as a whole or of its key assets."

It's a situation practically guaranteed to placate angry investors, and it is having the expected result on the stock price even as we speak, with PDL already up 9% for the day. Even so, I figure it can't hurt to take a look at Wachovia's record before deciding if the market is reacting correctly. So let's take a peek at some of the banker's best and worst calls in the medical and biotech fields:

OK, so Wachovia's good at picking medical device makers and pharmacy benefits managers. But what about drugs?

Hmm. Less impressive here, it seems. And the ResMed results show that Wachovia isn't always perfect on medical devices. I must say that, but for the news that broke yesterday, I'd be inclined to shy away from taking Wachovia's advice on PDL, based solely on the banker's record.

That said -- and again, this will come as no news to Rule Breakers members, as analyst Charly Travers has done a bang-up job following PDL's story -- Charly has suggested that when it comes to PDL: "The worst is already over. I don't see much downside to the share price, because the company's market cap is easily supported by the royalty revenue from its technology licensees and the expected proceeds from the ESP drugs." If Charly's right about this, then recommending PDL today should be like shooting fish in a barrel -- even Wachovia can't foul this one up.