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 ...
One of the best stock pickers in the business kicked off the week with upgrades for a trio of home-improvement retailers this morning. The housing crisis notwithstanding, Credit Suisse tacked "outperform" ratings on Home Depot (NYSE: HD), Lowe's (NYSE: LOW) and Bed Bath & Beyond (Nasdaq: BBBY).
Expressly disclaiming "any confidence that things will not get worse" for retailers who cater to homeowners, Credit Suisse stressed that it sees these firms as value plays. The banker doesn't even exclude the possibility that the stocks will continue to slide in price as the recession takes form, but says that the odds suggest "that the relative worst is behind the stocks."
So Credit Suisse isn't "calling a bottom" here. Instead, it's weighing the current prices, and gambling on an eventual recovery in price to somewhere closer to what the stocks are actually worth. Let's see how well that has worked for Credit Suisse in the past.
Hit the rewind button
Rather than focusing on its retail record in particular, or highlighting its absolute best or worst picks, I'm going to survey a few of Credit Suisse's older picks -- ideas that the banker was tossing around when CAPS started up in 2006 -- and see how those have fared:
|
Company |
Date of Call: |
Credit Suisse Said: |
CAPS Says (out of 5): |
Credit Suisse's Pick Beating (Lagging) S&P by: |
|---|---|---|---|---|
|
Altria (NYSE: MO) |
10/20/06 |
Outperform |
***** |
32 points |
|
Hewlett-Packard (NYSE: HPQ) |
8/17/06 |
Outperform |
**** |
17 points |
|
XM Satellite (Nasdaq: XMSR) |
9/14/06 |
Outperform |
* |
(25 points) |
|
Best Buy (NYSE: BBY) |
12/21/06 |
Outperform |
*** |
(8 points) |
From its first pick, captured by CAPS on Aug. 7, 2006, through the end of that year, we have Credit Suisse on record for 82 still-active picks. Of those, 44 have outperformed the market, and 38 have underperformed, for a record of 54% accuracy on its "long-term" guesses (equal, incidentally, to Credit Suisse's overall record of 54% accuracy).
Now, 54% accuracy may not sound so great in a professional stock picker. Still, it's hard to argue with its long-term guesses today. All three of the banker's valuation plays are trading for attractive P/Es relative to their growth rates. Each one sells for a PEG of less than 1.0, and Lowe's in particular looks like an out-and-out bargain at its super-low PEG of 0.7. Call me an optimist, but I have to agree with Credit Suisse's buy recommendations today -- all three of them.
Disagree? Feel free. Come on over to CAPS and tell us whether you think
will outperform the market. Long- or short-term, it's your call to make.
