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." In our recurring column "This Just In," where the most headline-worthy upgrades and downgrades undergo our Foolish scrutiny, we test the analysts' logic and examine their records to help you decide whether they're worth listening to at all. And in "Get to Know a Guru," we use upgrade and downgrade news as a springboard to introduce you to some of the lesser-known names in analyst-land. Up this week: Janney Montgomery Scott.
Profiles in punditry
On Wednesday, deep Southern banker Alabama National Bancorporation
If you're wondering just who the heck Janney is, and what it knows about banks, well, you're not alone. This is the first time I'd heard of Janney, although I've since discovered that the firm has quite a history. As for what kind of history, well, that's precisely what we'll be looking into today, as we get to know this guru.
Here's what Motley Fool CAPS tells us:
The second oldest member of the New York Stock Exchange, Janney Montgomery Scott is one of the largest full-service securities brokers and dealers in the United States. The company has roughly 100 offices along the East Coast and serves over 350,000 customers across the country. Janney's Equity Research team is composed of 16 senior analysts covering over 200 companies in four main industry verticals: technology, financial institutions, health care, and basic industry. Within these industries, the team likes to focus on small- and mid-capitalization companies.
Further digging reveals a couple of other factoids that may be of interest. First, Janney is a wholly owned subsidiary of Penn Mutual Life Insurance Company. Second, it's affiliated with Countrywide Financial
Are these guys any good?
So much for the firm's biography. What we really want to know about is its resume. When Janney speaks, should investors listen?
There's no nice way to say this: If its CAPS record is any indication, you absolutely should not listen to anything Janney has to say. On CAPS, we hide its rating behind the fig leaf of an "Under 20" euphemism to avoid undue embarrassment. But you can assume that the firm's true rating is very low indeed -- because its overall CAPS score is negative, and its 37% accuracy rating tells you that Janney's picks are more often wrong than right. For instance:
Company |
Janney Says: |
CAPS Says: |
Janney's Pick Lagging S&P By: |
---|---|---|---|
BankAtlantic Bancorp |
Outperform |
* |
11 points |
Sovereign Bancorp |
Outperform |
* |
10 points |
People's Bank |
Outperform |
** |
6 points |
Of course, every dog has its day. Janney's good days were when it picked stocks including these:
Company |
Janney Says: |
CAPS Says: |
Janney's Pick Beating S&P By: |
---|---|---|---|
ImClone |
Outperform |
* |
11 points |
First Niagara Financial |
Underperform |
** |
1 point |
For a firm that, by its own account, devotes one-quarter of its efforts to following financial institutions, Janney has a pretty lukewarm record when picking banks. And on Alabama National in particular, Janney blew the call when it removed its buy rating only after Alabama National missed its earnings target. In the meantime, over the period in which Janney endorsed Alabama National (from June 2006 through yesterday's date,) the stock underperformed the S&P 500 by a good 25 points. Long story short, I don't think investors have a lot to gain from following this guru's advice.
Fool disclosure
Fair is fair -- I don't want to leave you with the impression that Janney is unique in its inability to pick winning bank stocks. In fact, when checking on who has done a better job than Janney in evaluating Alabama National, I learned two bits of trivia:
- First, the "score leader" on Alabama National has a negative score on the stock.
- Second, Keefe, Bruyette & Woods, the only other Wall Street professional we've got on record with a pick on Alabama National, has an even more miserable CAPS reputation than does Janney. Go figure.
But maybe you can do better? Then step on up and tell us what you think about Alabama National. It shouldn't be too hard to beat everyone else who's tried so far.
Motley Fool CAPS: It's fun, it's free, and it just might make you famous.
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 275th out of nearly 28,000 ranked players. The Fool has a disclosure policy.