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 that individual investors and pros alike assign to stocks. 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 Kaufman Bros. We're tracking the calls of this research-based full-service investment bank, securities trading firm, and brokerage operation headquartered in New York City. As of this writing, Kaufman is ranked 75th overall in CAPS and fifth among professional analysts.
A ranking of 75 probably won't make the cut on American Idol, but with 23,000 participants in CAPS, Kaufman's score puts it ahead of more than 99% of other investment portfolios. Take that, Simon!
The sweetest calls of 'em all
The firm's big recent big winners include ValueClick
If you're looking to piggyback on some newer picks, however, know that Kaufman most recently rewarded "outperform" ratings to DRS Technologies
Street wisdom worth using
You might have noticed that Kaufmann's recommendations come primarily from the universe of media, communications, and technology. That's no accident.
The media sector, in particular, has some pretty strong tailwinds working in its favor. Multiple-system operators -- which Kaufmann likes to focus on -- should continue to benefit handsomely as consumers become more comfortable with cable modems, digital video, and even voice-over-IP (VoIP) services. After all, who doesn't have some type of bundled package with their cable company these days?
In the communications industry, wireless-telecom providers -- despite high penetration rates -- should be able to maintain strong cash flow, double-digit subscriber growth, and revenue growth for the foreseeable future. Third-generation technology and, again, a shift toward VoIP ought to provide ample opportunity for investors to make money on the winning business models. I'm not a big believer in top-down investing, but let's face it: Some industries have a brighter future than others.
A large part of investing is being able to limit an investment search within growing markets, or, at the very least, ones that won't be going the way of the buggy whip. Obviously, market-stomping trends aren't lost on Kaufman's analysts.
The trend is your friend
According to the company's website, Kaufman "integrates financial, technical, operational, international, and legal expertise to provide accurate and comprehensive analysis of industry trends. ... Kaufman Bros.' focus on the communications, media, and technology sectors provides us with the competitive advantage to separate us from the rest."
It's also interesting to note that -- given the numerous trends on which Kaufmann seeks to take advantage -- the firm has a relatively modest number of picks in our CAPS database. But with an accuracy reading of 67%, Kaufmann crushes the market by choosing stocks that have the very best chance to capitalize on new opportunities -- thus proving, once again, that there's just no substitute for getting to know a company's business model cold.
So, judging from Kaufman's expertise on a few favorable industries, its disciplined approach to stay well-within these areas, and, most importantly, its all-star performance in CAPS, this is one Wall Street firm that might be communicating high-growth picks for quite some time.
Past performance does not guarantee future results
Of course, the caveat here is that we've been tracking Wall Street picks for only 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, you can 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 that.
For more Foolish CAPS coverage:
Fool contributor Brian Pacampara thinks digital cable, wireless Internet, and VoIP are what the phrase "bundle of joy" really means. He holds no position in any of the stocks mentioned. The Fool's disclosure policy is always your trusted source of communication.
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