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 its worst and sorriest, too.
And speaking of the best ...
In a column yesterday, I highlighted Jefferies & Co.'s recent upgrade to "buy" of X-ray specialist and Motley Fool Rule Breakers recommendation American Science & Engineering
Turns out, there's a lag between when an analyst voices an opinion, when Reuters jots the new rating down, and when it shows up on Capital IQ. At last report, our data provider is still telling us only one analyst likes AS&E, but that's clearly not true. For no sooner had I submitted my column on Jefferies' upgrade yesterday, than out came Stanford Research and Roth Capital with two more buy ratings. And no sooner had I seen that, than Stifel Nicolaus dropped me a line to advise: "Hey, we like AS&E, too!" For those keeping track, that's now a solid majority of analysts rating AS&E a buy. Something, it would appear, is afoot.
And what might that be?
Stifel Nicolaus was kind enough to not only correct my analyst headcount yesterday, but also to provide a copy of its report explaining the sudden upsurge in optimism. Herewith, a few excerpts, with clarifications in brackets:
- "AS&E has been developing a ruggedized version of [its 'Z Backscatter' bomb-detecting van. The new military trailer is known as the 'ZBMT']."
- "[Last week] we became aware of an amendment to the FY2008 budget request for expenditures related to the Global War On Terror (GWOT) calling for $75 million [to be spent on these ZBMTs.]" This would be the $75 million U.S. Navy order that Jefferies was referring to in its upgrade.
- Stifel predicts that we'll "see an order for 68 units priced at $1.1 million each with deliveries expected to begin in April 2008 at a rate of 10 per month for six months with the final eight units to be delivered in October 2008."
- Because the order isn't final, and funding not yet approved, Stifel has not factored the expected $75 million in revenue into its fiscal 2009 estimates. But if the order does appear, "we think there is substantial upside potential to our current [fiscal year] 2009 forecasts."
Indeed. Those 75 million hypothetical dollars would equate to more than five months' worth of AS&E's annual revenues at current sales rates. But before we all hop astride the AS&E train, let's take a moment to consider the records of the analysts shouting, "All aboard!"
We discussed this one in detail yesterday.
As you may recall, when last we looked at Stanford, the analyst's CAPS performance was pretty darn poor. Things haven't changed much. Today, Stanford has a negative CAPS score, still a CAPS rating of "under 20," and a record of getting just 41% of its picks right -- a slight improvement. Notable gaffes include:
CAPS Says (Out of 5):
Stanford's Pick Lagging S&P By:
Roth's rep is a little better than Stanford's. This analyst scores an above-average CAPS rating of 69.07, on 42% accuracy. A couple of notable picks for this one include:
Roth's Pick Beating (Lagging) S&P By:
We checked in on Stifel recently as well. While the firm no longer inhabits the 99th percentile, it's still sporting a respectable 76.60 CAPS rating, thanks to savvy picks such as:
Stifel's Pick Beating S&P By:
More important than the analysts' records in general, though, are their records on AS&E in particular. Stanford's performance in this regard seems mixed. It initiated coverage with a sell rating in August 2006, only to upgrade the stock three days later (beating the market by 5 percentage points in three days!), and then upgrade it further in October 2006 -- and downgrade it again at some point subsequently.
Stifel's record is better -- and clearer. Stifel initiated coverage of AS&E in March 2007, and through all of the stock's ups and downs, Stifel's pick is beating the market by 8 percentage points.
And Roth has the best track record of all on AS&E. Recommending the stock from August 2006 through July 2007, Roth racked up a whopping 27 points' worth of market outperformance.
I'm not big on short-term trading, but for those who enjoy the sport, I imagine that Stanford's performance in August 2006 merits a round of applause. As for the other analysts, well, their records speak for themselves. Jefferies is an all-around talented stock picker, while both Roth and Stifel look to be long-term investors with a good feel for AS&E in particular. In all, I'd say the analysts in AS&E's corner today bode well for the stock.
Fool contributor Rich Smith owns shares of American Science & Engineering. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's ranked No. 793 out of more than 75,000 players. The Fool has a disclosure policy.