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." Here, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

Crisis …
Rahm Emanuel once advised the president to "never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before." This morning, the ace stock pickers at Raymond James have taken that advice to heart.

When AT&T (NYSE: T) announced its intention to buy T-Mobile Monday, leapfrogging Verizon (NYSE: VZ) to become the nation's largest wireless provider, Wall Street cried "crisis" and let loose the bears.

Not all telecom players suffered, of course. In fact, shares of Alcatel-Lucent (NYSE: ALU) rose on the theory that AT&T would stick with its favored equipment maker postmerger, and even give Lucent more business. But within hours of the news, shares of Sprint Nextel (NYSE: S), now apparently doomed to become a bit player in the telecom world, had lost more than 15% of their market cap. Clearwire (Nasdaq: CLWR), which had been in talks to sell spectrum to T-Mobile, lost its prospective buyer and tumbled as much as 6%.

… and opportunity
The damage didn't end there. Monday's big losers included three companies that make their money developing, owning, and operating cell-phone towers -- the arteries through which telecom firms pump the wireless "blood" that keeps our calls from dropping. Investors believe that when AT&T buys T-Mobile, it will pick up that firm's network of cell-phone towers, expand its own call coverage, and hence have less need to build or lease new towers of its own.

If true, this would certainly be bad for the tower operators' business. But amid this crisis in confidence among investors, Raymond James spots an opportunity to profit. The analyst recommends buying shares of American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), and SBA Communications.

Raymond James assigned all three stocks its highest "strong buy" recommendation. And while it isn't the most talkative stock picker, the few picks it has let slip over the years have tended to beat the market handily. At last report, more than 72% of Raymond James's recommendations were beating the S&P 500's performance.

So while we don't know precisely what attracted the analyst to these three stocks, the fact that they fell so hard this week tells me they probably deserve a quick look-see.

Valuation matters
At first glance, it's hard to explain Raymond James's enthusiasm for these three stocks in particular. With P/E ratios that range from a "low" of 54 (American Tower) to a high of infinity (thanks to Crown Castle's and SBA's losses), these supposed bargains are anything but obvious.

But look a little closer, and you start to see what attracts the analyst. SBA generates $135 million in annual free cash flow, even as it reports "losing" $195 million under GAAP accounting statistics. Crown Castle tells a similar story: $311 million in GAAP losses, $375 million in positive free cash flow. Best of all is American Tower, which earned $373 million last year, whilst churning out nearly twice as much free cash flow -- $674 million.

Perhaps that's why Raymond James is so enthusiastic about these stocks. Valued on their free cash flow, the three companies all trade within a whisker of each other's valuations. SBA shares sell for 32 times annual free cash flow, Crown Castle fetches a multiple of 31, and American Tower is the cheapest of the lot at 29 times FCF.

Foolish final thought
I should add that these numbers also help explain why the ubergrowth investors at Motley Fool Rule Breakers have picked only one of Raymond's faves to outperform the market: American Tower. At 29 times free cash flow, American-T's not only the cheapest of the bunch -- it's also got:

  • the smallest amount of net debt relative to its market cap
  • and the fastest growth rate by far.

According to the analysts who track it, American Tower is destined to grow its earnings nearly 25% per year for the next five years. Weighing all the other factors into consideration, that has Rule Breakers betting it's the best  bargain of the bunch -- and I agree.