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 ...
On Tuesday, Cowen & Co. conducted a defense (contractor) assessment, and came to two major conclusions. Lockheed Martin (NYSE:LMT) is going to attract significant ire from the ascendant Democrats in Congress, who may take out their frustration with the administration on its No. 1 Department of Defense contractor. General Dynamics (NYSE:GD) and Raytheon (NYSE:RTN), in contrast, should be able to fly below the radar and emerge from the coming storm relatively unscathed. Result: Cowen downgraded Lockheed to neutral on its heightened "political risk," whilst maintaining an outperform rating on General Dynamics and giving another to Raytheon.

Of course, Cowen didn't base its analysis solely on a "Democrats hate defense" theory. The investment banker also observed that after expanding its earnings 40% between 2005 and 2006, growth would likely slow to just 10% between 2007 and 2008. But to this Fool's mind, that's not a reason to downgrade the stock, but to upgrade it -- after all, the consensus of the 20-odd analysts tracking Lockheed is that growth will be just 6%.

How the mighty have fallen
Logical consistency aside, investors in the defense sector might be curious about just how much weight they should give this analyst's opinions. Just a few months ago, I would have replied "quite a lot," but I'm less certain about that now. You see, back when Motley Fool CAPS was young and I first began penning this column, Cowen shone. In a January column, I observed that with its CAPS rating "in the 99th percentile," Cowen was "sitting amongst the rarefied elite of CAPS 'players.'" As recently as late March, that remained true -- but something terrible has happened to the bankers since then.

Specifically, Cowen started making picks like these:

Cowen Says:

CAPS Says:

Cowen's Pick Lagging S&P By:




16 points

MIPS Technologies (NASDAQ:MIPS)



4 points

BigBand Networks (NASDAQ:BBND)



4 points

Brightpoint Inc (NASDAQ:CELL)



1 points

In fact, since we last checked in on Cowen two months ago, its new recommendations have been underperforming twice as often as they outperformed. And while four bad calls out of six may not sound bad, when a broker makes as few public recommendations as Cowen does (just 62 active recs that we're tracking), those four bad calls can torpedo its record for accuracy.

Throw in some downturns in past-recommended companies, and you're left with a former highflier now rated in the 71st percentile by the CAPS network -- a worse stock picker than more than 8,000 other investors, precious few of whom own their own investment banks.

Foolish takeaway
So who is Cowen, in the final analysis? Is this banker the creme de la creme of Wall Street? An analyst better than more than 99% of all other investors out there? Or is it a subpar stock picker, one that gets more than half its guesses wrong, and not worthy of the title of CAPS All-Star?

I guess we're going to have to suspend judgment on that score for a while, and give these guys time to "season." Whether they sink further or rise back to the top may well hinge on how yesterday's decisions to laud Raytheon, ignore General Dynamics, and pan Lockheed turn out.

Consolation prize
While we're waiting for Cowen to get its act back together, where can you turn for unbiased advice on the investability of Lockheed, General Dynamics, and Raytheon? Why, to CAPS, of course. Click on the links below to learn what the companies' respective score leaders have to say about each defense contractor:

You may be surprised to learn that the score leader on each is no professional analyst -- but a lay investor, just like you and me.

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 No. 421 out of more than 29,000 raters. The Fool has a disclosure policy.