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 ...
As markets tumble, and reputations stumble, "best" is a word that's become increasingly relative as applied to Wall Street analysts. Take, for example, BMO Capital Markets. Once upon a time, this subsidiary of BMO Financial Group, which also includes BMO Bank of Montreal, ranked in the upper echelons of the CAPS elite. Today, BMO considers it a good day when it places in the top 50%.

So when BMO comes out and pulls its buy rating on Dell (Nasdaq: DELL), as it did yesterday, does its low ranking mean we should dismiss its recommendation out of hand?

Let's go to the tape
I must admit that based on the raw numbers staring me in the face -- the record of 46% accuracy on its picks, and the average underperformance of each pick versus the S&P 500 -- my instinct was to answer: "Yes. BMO appears to stand for 'Below Market Oracle.'"

And then I took a closer look at those picks where BMO still excels:

Company	BMO Said:	CAPS Says (out of 5 stars)	BMO Pick Beating S&P by:
Advanced Micro Devices (NYSE: AMD)	Underperform	**	42 points
Intel (Nasdaq: INTC)	Outperform	****	5 points
Hewlett-Packard (NYSE: HPQ)	Outperform	****	3 points
IBM (NYSE: IBM)	Outperform	***	3 points
Apple (Nasdaq: AAPL)	Outperform	****	1 point

Now, no analyst is perfect. But the closest BMO has come to a high-profile blowup in the PC world was last summer's outperform call on NVIDIA (Nasdaq: NVDA) -- one that, to be fair, almost everyone and his Great-Aunt Gertrude got wrong. Put the NVIDIA disaster to one side, though, and everywhere else in the computer industry, BMO has the golden touch.

In light of BMO's demonstrated expertise in all things PC, I have to admit to some trepidation as I type out the next few paragraphs. But I have to call these things as I see them. So ...

Dell: swell or sell?
By now, we've all heard the bad news about Intel's Q4 guidance walkback. We've read the pundits pontificating as to how this sounds the death knell for profits in the PC industry. Everyone from Citigroup to Goldman Sachs to, yes, BMO itself spent most of yesterday wearing out their erasers, refiguring lower earnings for Dell and HP.

And that's logical. If Intel isn't selling chips, chances are the computer makers aren't moving much hardware either.

Still, while I see the risks in this investment (they're glaringly obvious, which is probably why so many analysts noticed), from where I sit, the opportunities loom even larger. True, it might be exposed to a waning PC market in the short term. Longer-term, however, Dell's current stock price offers the prospect of beaucoup profits for patient investors.

Consider: Dell is selling for a P/E of 8 today. Eight -- for Dell. And while analysts see short-term risk in the stock, in the longer term, they still expect Dell to grow its profits at nearly 12% per year for the next half-decade. To me, this seems an insanely cheap price to pay for the world's No. 2 computer maker.

Foolish takeaway
Say it with me, folks. Dell's just swell.