We at The Motley Fool 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 track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
Banc of America Securities begged to differ with the self-proclaimed Best Buy (NYSE: BBY) this morning, citing a series of factors that will hurt the stock in the near term. What's got B of A so down on this pick of both Stock Advisor andInside Value? The arguments against Best Buy range from the laughable to the logical to the short-sighted.

  • Laughable: Wal-Mart (NYSE: WMT) and Circuit City (NYSE: CC) (har!) pose competitive threats to Best Buy.
  • Logical: A weakening economy will depress consumer sales in general.
  • Short-sighted: Overproduction of flat-screen televisions by the manufacturers will depress profit margins. I call this short-sighted because, yes, excess supply on the market could force Best Buy to compete on price with rivals trying to move their own wares, compressing its margins over the next couple of quarters. But at the same time, Best Buy's suppliers would be cutting the prices they charge. As supply adjusts to lower consumer demand, Best Buy's margins should re-expand.

So in sum, I give B of A one out of three on its arguments in favor of downgrading the stock. (While that may sound bad, in analyst-land, it's actually not an uncommon batting average.)

Let's go to the tape
But hey, maybe I'm wrong. At first glance, B of A's record suggests that this analyst has a handle on consumer electronics:


B of A Said:

CAPS Says (5 max):

B of A's Pick Beating S&P by:

Apple (Nasdaq: AAPL)



59 points

Nokia (NYSE: NOK)



49 points

Or does it ...?


B of A Said:


(5 max):

B of A's Pick Lagging S&P by:

Motorola (NYSE: MOT)



37 points

Dell (Nasdaq: DELL)



20 points

That second glance helps illustrate two things about B of A's record. First, it's nearly as hit-or-miss with its picks as any of the other big names on Wall Street, getting just 53% of its picks right. Second, however, we see that when it is right, B of A often hits it out of the park. The gap between its winners and its losers, score-wise, helps explain how B of A translates an accuracy record little better than a flipped coin into a rank in the top 10% of CAPS investors.

Foolish takeaway
When all's said and done, though, I have to disagree with B of A on this one, for three reasons:

  • First, because the banker's arguments against Best Buy just don't add up. Will Best Buy be hurt by a weakening economy? No doubt. But will the premier purveyor of electronic playthings suffer worse than the market at large? I have my doubts.
  • Second, because B of A's record fails to inspire unshakeable confidence. B of A's accuracy is little better than breakeven, and its record in consumer electronics looks similarly uninspired.
  • Third, Best Buy looks just plain cheap to me. Selling for 14 times trailing earnings, and a mere nine times trailing free cash flow, while expected by most analysts to grow its profits at 15%, Best Buy really is.

That's my take. Let's hear from you.

To claim a free trial and learn what the lead analysts at Motley Fool Stock Advisor and Motley Fool Inside Value think, just click the appropriate link.

Dell is a selection of Stock Advisor and Inside Value. Wal-Mart is a choice at Inside Value, and Apple is one at Stock Advisor.

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. 796 out of more than 85,000 players. The Fool's disclosure policy never runs with scissors.