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 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 ...
As she watched investors shred the shares of sports apparel retailer Zumiez (NASDAQ:ZUMZ) yesterday, my Foolish colleague Alyce Lomax mused publicly: "Were quarterly results that disappointing?" Early this morning, investment bank McAdams Wright Ragen (MWR) answered: No. Actually, they weren't that bad at all.

MWR ended the trading week on a high note as it upgraded shares of former "hold" stock Zumiez to "buy." While news reports did not give a reason for the upgrade, I suspect the fact that the stock was trading 7% cheaper after reporting 45% profit growth Wednesday had something to do with MWR's decision. Still, as Alyce observed: "Zumiez shares may have suffered a significant wipeout [yesterday], but it's trading at 31 times forward earnings, which likely still sounds pricey for many conservative investors."

So here's the question: Yes, Zumiez shares are cheaper now. But are they cheap enough to beat the market from this point -- or did MWR jump the gun with its upgrade?

Let's go to the tape
For clues to how skilled MWR is at calling a bottom, we turn to Motley Fool CAPS for a peek at its record. What we find is that, although the broker has a decent record of making correct calls -- it scores a 53% for accuracy -- its overall CAPS rating of 56.6 places it pretty far back in the pack of lay and professional analysts: 12,701st place, to be precise, out of a field of well over 29,000.

Why is MWR lagging? Well, picks like these haven't helped:

That said, so long as MWR stays away from tech and burger joints, its record improves markedly. Its past endorsements, no longer active, include two picks I suspect will spark Zumiez investors' interest:

And incidentally, since reversing course on Cutter, and predicting it would underperform last month, MWR has added another point to its win column on the downside.

Put it all together, my feeling is that MWR has quite possibly made the right call here. True, it's not the world's best stock picker in general, but it does seem to have a good handle on the clothing trade in particular. When you add in the fact that the Fool's own Tom Gardner put his stamp of approval on Zumiez when he added it to the Motley Fool Hidden Gems portfolio nearly one year and 22% ago -- well, that just adds to my conviction that MWR has picked a winner today. (What other retailers does Tom like? Pick up your free 30-day trial of Hidden Gems at the door, and find out.)

Next step
So now you know what MWR thinks. You know Tom's opinion, Alyce's, and my own. Looking for a fifth opinion? On CAPS, we've identified the player with the highest performance to date on Zumiez -- currently outperforming the market by an astounding 77 points with his (or is it her?) pick.

To learn whether this mystery stock picker expects Zumiez to bounce back, just click here. Oh, and don't be surprised when you learn that she (or was it he?) is no Wall Street wizard at all, but an ordinary investor 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. 985 out of more than 29,000 raters. Microsoft is an Inside Value newsletter recommendation. The Fool has a disclosure policy.