This Just In: Upgrades & 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 worst and sorriest, too.

And speaking of the best ...
Yesterday, Cleveland-based independent analyst Longbow Research issued an upgrade for NVIDIA (NASDAQ:NVDA), returning the stock to its buy list after a three-month stint in limbo at "neutral." Combined with a similar upgrade from JPMorgan earlier in February, and a downgrade to neutral from Lehman Brothers, Wall Street's turning bullish on the gaming-graphics guru by a 2-to-1 margin in the last month.

That's nice. But who the heck is Longbow?
I was wondering the same thing, so I did some digging on Longbow. The Ohio-based firm's claim to fame, as laid out on the "bragging page" of its website (not the actual title), is that StarMine ranked it ninth for "stockpicking accuracy" in 2005. I'm guessing that its initiation of a buy rating on NVIDIA that year helped earn it the accuracy title; by the time Longbow benched the stock with a neutral downgrade, NVIDIA had rushed ahead to outperform the S&P 500 by an astounding 91 points.

But my, how things change. Reviewing its CAPS page -- where we've been tracking Longbow's performance for the last six months -- we see that the firm earns the CAPS booby prize: the dread "Wall Street Worst" icon, reserved for the "bottom 10% of all Wall Street players." In contrast to JPMorgan and Lehman, both of which score in the top 10% of CAPS players with ratings that top 90, Longbow's last 14 public picks have yielded a grand total of 10 losers. Here are a few of the biggest blunders:

Of course, it's notched a couple of victories, too:

With its miserable CAPS rating, accuracy falling below 25% in the last six months, and an expertise that apparently centers on natural resources (judging from Institutional Investor calling it the "best regional boutique in the Metals & Mining sector in 2005 and 2006"), I'd ordinarily hesitate to follow Longbow's lead on a high-tech stock like NVIDIA.

But ...?
But I have to admit that both of Longbow's last two picks for NVIDIA have been right on the money. It got investors into the stock in time for a 91-point outperformance in October 2005. Then it kept them away in November 2006, avoiding its subsequent 13-point underperformance of the S&P 500. Today, Longbow says NVIDIA is a buy, and in doing so, it's lining up with strong stockpicker JPMorgan.

Perhaps even more encouraging, Longbow's once again on the side of the Fool's own David Gardner, who has encouraged Motley Fool Stock Advisor members to own NVIDIA ever since first recommending it nearly two years and 162 points worth of outperformance ago. (Discover all of David's picks with a free 30-day trial.)

Who else knows NVIDIA, you ask? At CAPS, the lead scorer on the company isn't an investment bank, or a professional Fool, either. To learn this Fool's identity and thoughts on the company, just click here.

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 ranked 28 out of more than 23,000 raters. Silicon Labs is a Motley Fool Stock Advisor pick, while JPMorgan Chase is a Motley Fool Income Investor selection. The Fool has a disclosure policy.