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 its worst and sorriest, too.

And speaking of the best ...
"Best" is a bit strong to describe our featured analyst today. Rather, let's just call Soleil Securities "better." As in: "With a record of around 50% accuracy and a CAPS rating of 59.23, Soleil is better than most other investors."

On Friday, this analyst put its tenuous reputation for outperformance on the line with a stock pick that's way, way out there. Citing "revenue and cash flow generation significantly more favorable than we had expected and with better apparent liquidity," Soleil spun on a dime and shifted its "sell" rating on AMR (NYSE: AMR  ) stock all the way up to "buy."

Come again?
You heard me right. In a world of $135 oil and particularly pricey jet fuel, Soleil told you to buy an airline. Crazy. I mean, sure, Soleil has picked some winners in its day -- and even some winners in the airline industry:

Company

Soleil Said:

CAPS Says (out of 5):

Soleil's Pick Beating S&P by:

ExpressJet Holdings  (NYSE: XJT  )

Underperform

**

61 points

IBM (NYSE: IBM  )

Outperform

***

42 points

Amazon.com (Nasdaq: AMZN  )

Outperform

**

26 points

Continental Airlines (NYSE: CAL  )

Outperform

*

7 points

But overall, its attempts to fly have "encountered turbulence." Consider Soleil's record on airline stocks in particular:

Company

Soleil Said ...

... in:

Performance Versus S&P:

AMR

Underperform

May 2008

16 points

AMR

Outperform

May 2007

(64 points)

Continental Airlines

Outperform

June 2008

7 points

Continental Airlines

Underperform

March 2007

11 points

Delta Air Lines (NYSE: DAL  )

Outperform

May 2007

(58 points)

Southwest (NYSE: LUV  )

Outperform

March 2007

(1 point)

SkyWest

Outperform

March 2007

(3 points)

UAL

Underperform

May 2008

12 points

UAL

Outperform

January 2008

(75 points)

ExpressJet Holdings 

Underperform

September 2007

61 points

ExpressJet Holdings 

Underperform

March 2007

5 points

   

Total:

(89 points)

That's right. Add it all up, and Soleil's travails in the airline industry have cost investors a combined 89 percentage points' worth of market underperformance over the past two years -- that's nearly eight points of negativity per pick. Consider further Soleil's prediction regarding AMR in particular. According to the analyst, AMR will lose $8.75 per share this year and a further $6 per share next year.

Six dollars? Why, all of AMR costs just $6 today! Call me a Fool, or a fool, but that doesn't look like much of a reason to own AMR.

Foolish takeaway
You might think that profiting from airlines is like shooting fish in a barrel. Soleil's record shows that it's much more like a crapshoot.

Disagree? Feel free. At Motley Fool CAPS, we don't care whether you're a CFA or a DFA -- all opinions are welcome.

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 ranked No. 1,855 out of more than 110,000 players. Amazon is a Motley Fool Stock Advisor pick. The Fool has a disclosure policy.


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