Profiles in Punditry

In our recurring column "This Just In," we cover some of the hottest stocks and the most headline-worthy upgrades and downgrades in the market. But we also go behind the scenes, sizing up the logic of the analysts behind those ratings, and shedding light on their records to help you decide whether they're worth listening to.

Today, we begin an occasional companion column to "This Just In." Using upgrade/downgrade news as a starting point, "Profiles in Punditry" will introduce you to some of the lesser-known names in analyst-land. Up this week: Stanford Research.

Get to know a stockpicker
Friday morning, an unusual name popped up on MSN Money's daily list of analyst upgrades and downgrades. Stanford Research upgraded the stock of corporate ditch-digger Insituform (NASDAQ:INSU) from "hold" to "buy." Say it with me, now: "That's nice ... Um, who the heck is Stanford Research?"

I was wondering the same thing myself. Fortunately, at Motley Fool CAPS, we've been tracking the firm for a few months now. Here's what we know about the firm:

"Stanford Research provides institutional equity research as well as focused Washington policy research. Its analysis is distinguished by this unique combination of equity and policy research. Stanford Research is the oldest and largest Washington-based institutional research group and has been consistently ranked in the top four by Institutional Investor magazine for Macro/Washington research. Equity analysts focus on small and mid-cap companies across the following sectors: consumer/retail, media, energy, financial institutions, health care, technology, and water/environment."

Are these guys any good?
We've covered the firm's biography. What about its resume? When Stanford speaks, should individual investors listen?

According to a quick scan of CAPS ... uh, probably not. Its Ivy League-ish name notwithstanding, Stanford ranks at the bottom of the barrel of CAPS players, with a ranking of "Under 20." (At CAPS, players in the bottom quintile are spared embarrassment by getting hidden behind this coy fig leaf.)

Reviewing the frequency with which it makes correct guesses about where a stock is heading, we see that Stanford's accuracy rating is a lowly 38.30%. That means it's wrong nearly twice as often as right. For example:

Of course, even a flipped coin is bound to be right half the time, and a stopped clock at least twice a day. On those occasions when Stanford guessed correctly, it picked:

As for its pick on Insituform specifically, I'm not terribly optimistic. Over on CAPS, we rate both the raters and the stocks they rate, our lay and professional investors give this little pipe-layer just a single star -- the lowest rating possible. If you're interested in the stock, but put off by Stanford's record, consider dropping by CAPS and seeing what our top-rated scorer on the company has to say. Click here to learn his (or her?) identity, and whether he (she?) thinks Insituform is a buy.

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 81st out of well over 25,000 raters. The Fool has a disclosure policy.