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 ...
It's a dangerous world out there (for investors), say the investing gurus at Stifel Nicolaus, and if they were you, they'd stay home this stock-shopping season -- at least when it comes to travel stocks. Raising a moistened finger to test the "headwinds of economic uncertainty," Stifel's soothsayers say see "certain new dynamics in the travel industry [that] will undermine results in 2008 and beyond." Specifically, Stifel warns that travel trends have "dipped" in the U.S., and that even well-heeled and euro-walleted Europeans may move around less in coming years. In an attempt to get ahead of that curve, the investment banker pulled its buy ratings on three companies tied to the travel industry: Expedia (NASDAQ:EXPE), Orbitz (NYSE:OWW), and Motley Fool Stock Advisor recommendation (NASDAQ:PCLN).

With P/Es ranging from 35 (Expedia) to 39 (Priceline) to infinity (for the unprofitable Orbitz), Stifel's call looks pretty good from a surface-level view. The stocks sure do look expensive, and they'd be pricier still if travel waned and earnings fell. But before jumping to the conclusion that this superficial interpretation is the right one, let's pause for a moment to review the analyst's record in rating R&R stocks.

Let's go to the tape
Scanning the 270-odd active Stifel picks we're tracking on CAPS, I've dug up four more travel-related companies. Here's how Stifel has fared with each:


Stifel Said:

CAPS Says (out of 5):

Stifel's Pick Beating (Lagging) S&P by:

Carnival (NYSE:CCL)



5 points

Isle of Capri Casinos (NASDAQ:ISLE)



(24 points)

Marriott (NYSE:MAR)



(21 points)

Royal Caribbean (NYSE:RCL)



(3 points)

Hmm. Not encouraging so far -- Stifel's gone one for four.

Granted, Stifel made a brilliant call in endorsing Priceline in May of this year. (Although the firm was a bit late to the party -- at Motley Fool Stock Advisor, we recommended the stock in June 2004, delivering our subscribers a five-bagger.) Priceline had netted the analyst 98 CAPS points through yesterday's close. Meanwhile, Stifel's endorsement of Orbitz went the other way, underperforming the S&P 500 by 29 points before the analyst threw in the towel.

Foolish takeaway
In all, the best I can say about Stifel's travel-industry record is that it looks mixed. Two wins, four losses -- that's even worse than the analyst's overall CAPS record of 46% accuracy. Personally, I find that instructive for a couple of reasons. Firstly, the European economy looks a lot more robust to me than what we've got here at home. Secondly, I just don't think the travel stocks Stifel is panning are as overvalued as they appear at first glance -- at least in two instances.

Consider: When you look past the GAAP numbers and value these companies on their cash profits, both Expedia and Orbitz are selling for 12 times trailing free cash flow. They're also expected to grow their profits at 14% and 20%, respectively. In fact, from the perspective of cash profits, only Priceline looks overpriced at around 42 times free cash flow (versus 19% growth).

I admit, it's with reluctance that I make that last point. Priceline hasn't just been good to Motley Fool Stock Advisor subscribers, you see. It's also the single best-performing pick in my own CAPS portfolio. But now that Stifel has drawn my attention to the fact (thanks, guys), I'm inclined to go a step further than the analyst, and sell Priceline -- but buy Orbitz and Expedia.

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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. 844 out of more than 78,000 players. The Fool has a disclosure policy.