Whether they're too conflicted, too optimistic, too caught up in protecting their jobs, or just too wrong, professional analysts don't inspire as much awe as they once did. But that doesn't mean they're all bad.
True, we Fools are among the first to call attention to Wall Street's empty promises and stinky scandals. Not to mention our rather complete indifference to the upgrades and downgrades these "professionals" assign to stocks at a mind-numbing pace.
They're not all bad
In fairness, though, many analysts are indeed savvy stock pickers. The Wall Street Journal celebrates the best analysts and the best calls across industries annually. Even so, there's simply not enough transparency in the industry to know just who the best and worst analysts are. That's bad for the good analysts; they're unwittingly protecting the sheep.
Enter Motley Fool CAPS, our community-intelligence database, which tracks the "outperform" and "underperform" ratings assigned to stocks by individual investors and pros alike. In turn, every stock and every investor earns a rating. That means we can finally answer the age-old question: Which analysts are better stock pickers than my grandmother?
Bet with the best
Well, one pro ranked high atop the CAPS charts is Leerink Swann & Company, a full-service investment bank headquartered in Boston. As of this writing, Leerink Swann is ranked 222nd overall in CAPS (and 11th among professional analysts).
At first glance, a ranking of 329 might look pretty abysmal, but with more than 21,000 participants in CAPS, Leerink's score puts it ahead of 98% of other investment portfolios. Pretty good, huh?
The sweetest calls of 'em all
The firm's recent big winners include Celera Group
If you're looking to piggyback on some newer picks, however, know that Leerink most recently rewarded outperform ratings to Amylin Pharmaceuticals
Leerink's other two selections in CAPS, Wyeth
Street wisdom worth using
You might have noticed that the firm's recommendations come strictly from the medical supplies, medical distribution, and pharmaceutical sectors, with the firm's two best picks being development-stage biotech firms. That's no accident.
Health-care stocks, as a whole, are often among the most profitable, free cash flow-generating companies that you can find to invest in. The nature of the health-care business -- with its patent protection, high start-up costs, and scale efficiencies -- gives investors a nice edge to generate excess returns. But Leerink takes their health-care research up several notches by utilizing a huge medical information network, called MEDACorp, to pick out the most promising healthcare ideas.
According to the company's website, "The biomedical professionals in our network work with new or development-stage pharmaceuticals, medical devices, and biotherapeutics on a daily basis ... This leads us to investment conclusions and recommendations that we believe will have a higher degree of success than those of our competition. We know of no other investment house with such an extensive medical information network." Now that's what I call a scuttlebutt advantage.
Pick less, be right more often
It's also interesting to note that Leerink has earned its top 2% CAPS status with a mere nine selections (the minimum in CAPS is seven). However, with an accuracy reading of 89%, the firm is able to crush the market and the majority of CAPS Fools with quality, not quantity. Thus proving, once again, that investing isn't about the number of stocks you know, but rather how well you know your own portfolio.
The most important thing that investors can do is to remain patient, focus all your effort on the research process (not outcomes), and then swing hard at the few fat pitches that come along in your investment lifetime. In other words, you want to make your money count.
Judging from Leerink Swann's razor-sharp focus on health-care stocks, their extensive information network, and most importantly, their insistence on being enormously selective, this is one Wall Street firm that just might have you counting money for a while.
Past performance does not guarantee future results
Of course, the caveat here is that we've only been tracking Wall Street picks for a few months now. While we can't yet call the data predictive, it's at least interesting to examine.
If you'd like to take a look at the rest of Wall Street's best and worst analysts and their stock recommendations, click here to join the CAPS community absolutely free. You can also get all kinds of opinions on the stocks you're looking to buy, sell, or hold.
And hey, you might even find yourself surpassing some of Wall Street's biggest and brightest in no time.
The financial community has been opaque for too long. CAPS can change all that.
Foolish contributor Brian Pacampara takes care of his financial health and seeks the advice of Main Street Fools only. He holds no position in any of the stocks mentioned. The Fool's disclosure policy always takes great care to stay healthy.