This Just In: Upgrades and Downgrades

At The Motley Fool, we have our fun with the Wall Street analysts. We mock their pinstripe-and-wingtip attire. Their multimillion-dollar bonuses. And not unrelatedly, their failure to recognize the tech bubble -- or worse, recognizing it, then applying lipstick and pimping it to the individual investor. What's more, their ceaseless stream of upgrades and downgrades, sometimes mere days apart on the exact same stock, make Jim Cramer look like a poster boy for the "long-term buy-and-hold" movement.

As such, you may be surprised to see that we're now giving virtual ink to some of the hottest analyst upgrades and downgrades of the hour.

Isn't that a little hypocritical?
Guilty as charged -- if that were all we were doing. After all, an analyst's upgrading or downgrading a stock means little when viewed in isolation. That's especially true when you consider the heft of the firms doing the "analyzing." When a major brokerage firm issues a downgrade, the mere publication of the news often suffices to spark a selloff, "proving" the analyst right -- in the short term.

The analyst's record over the long term is far more significant -- and that's what we'll be focusing on in this column.

Mr. Market? Meet Mr. CAPS
Motley Fool CAPS, the Fool's tool for rating everything from stocks to investors to analysts to the long-term durability of the Toyota Corolla (give us some time on that last one), lets us take a magnifying glass to more than just the short-term meanderings of Mr. Market's mind. We'll also be tracking the long-term performance of Wall Street's best and brightest -- and worst and sorriest, too.

And speaking of the best...
Yesterday, Motley Fool Stock Advisor recommendation Aflac (NYSE:AFL) (yes, the duck company) received mixed blessings from Wall Street. On the one hand, William Blair downgraded the stock to "market perform" from its previous "outperform" rating. Keying in on the firm's 17% sales decline in Japan, Blair said it sees "no real prospects for improvement in sales in Japan," or at least not until banks are permitted to sell supplemental insurance in 2008.

Meanwhile, SunTrust Robinson Humphrey played duck's advocate yesterday, arguing that Aflac's Japanese sales have bottomed and could begin recovering as early as the second half of 2007. To avoid the rush, SunTrust encouraged investors to get in early, and upgraded Aflac to "buy" from "neutral."

So who's an investor to believe? Blair or SunTrust? One way you could decide might be by examining the investment houses' respective track records. There you'll see that Blair is saddled with a CAPS rating of ... N/A. (At CAPS, to avoid embarrassing particularly bad stock pickers, we hide all sub-20-percentilers behind a fig leaf of non-applicability.) In contrast, SunTrust has a superb record of picking winning stocks. Although it's not quite good enough to make it into the top 10% of Wall Street "players," its combined CAPS rating of 98.08 does put it in the top 2% of players overall.

Here are a couple of the picks that got them where they are today:

Based on their respective track records, therefore, I have to think the edge goes to SunTrust on this one. Still, it must be noted that the firm is not always right on Aflac. In fact, its last call on Aflac -- downgrading the stock to "neutral" in October -- appears to have been ill-timed. Over the last four months, Aflac shares in fact rose a good 10% in price, against just a 4% rise in the S&P.

And to find out who's the best CAPS analyst currently following Aflac, click here. (Don't be surprised, though, when you learn it's not a Wall Street firm at all.)

Aflac is a Stock Advisor recommendation. For more superstar picks from Tom and David Gardner, try a subscription on for size, free for 30 days.

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 21 out of more than 21,000 raters. The Fool has a disclosure policy.