This Just In: Upgrades and 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 worst ...
Yesterday morning, London-based financial services star HSBC downgraded the stock of fashionable accessorizer Coach (NYSE:COH) from "overweight" to "neutral." In so doing, HSBC withdrew an endorsement that, according to briefing.com, it had accorded to the handbag maker since at least February 2006.

Why the downgrade? News reports are mum on the reasoning behind HSBC's decision, but I've got a hunch or two. Over the last 14 months, HSBC's "overweight" rating has paid off handsomely for the analyst, as Coach thrashed the market's return, rising 41% in price against just a 12% gain for the S&P 500. Considering the rumblings that a subprime-spawned recession is in the offing, and that this could hurt consumers', er, pocketbooks, HSBC very likely thought today an opportune time to take some of its winnings off the table.

Sounds logical. But we all know how hard a time even the most wing-tipped of stockbrokers have trying to time the market. So whatever its reasoning, what are the chances that HSBC is accurately "calling the top" this time? For clues to HSBC's prescience, we turn to Motley Fool CAPS to get some insight on the broker's track record.

There we find that, its past success with Coach notwithstanding, HSBC is far from omniscient. Over the several months we've been tracking the firm, it's racked up a record of being wrong more often than it's right, and has generally underperformed a good 32% of our lay and professional players. Far from being one of "Wall Street's Best," HSBC's 68.20 CAPS rating doesn't even pay its admission to the "All-Stars" club.

What follows are a few of its recent flubs:

Of course, even a stopped clock is right twice a day. HSBC, too, has had some successes:

My read on HSBC? Judging from its record, the firm tends to get in the most trouble when it puts a sell rating on a stock. So it's perhaps lucky (for HSBC) that today, it's only calling Coach a hold rather than telling people to actually go out and sell it.

That said, I do see reason to worry about Coach's valuation, and I can't really fault HSBC for this call. At a trailing P/E of 33, Coach seems richly priced for the 20% growth rate that Wall Street is postulating. If you agree with the pundits that U.S. consumers' wallets are feeling pinched these days, you just might want to heed HSBC's caution and take some winnings off the table yourself.

So HSBC's on the fence, I'm leaning toward "sell" -- want a third opinion on Coach? There's no one better to ask than the person with the single best record of predicting the stock's performance. Fortunately, we've got him on record at CAPS. Learn the identity of this mystery Fool, and his opinion on Coach, with just one click of your mouse.

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 52nd out of well over 25,000 raters. Costco is a Motley Fool Stock Advisor choice. The Fool has a disclosure policy.