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 worst ...
In a "turnabout is fair play" moment, market commentator TheStreet.com (Nasdaq: TSCM) attracted some comments of its own yesterday, when San Francisco stock shop JMP Securities chimed in with a new rating on the stock. Fortunately for TheStreet.com, the rating was positive -- JMP initiated coverage at "market outperform."
But ...
Unfortunately, the stock promptly dropped 2.3% and closed down 1.6%. Doesn't surprise me -- JMP is just that bad.
How bad is it?
Let me count the ways: JMP has a negative CAPS score, a CAPS rank hidden behind the "Under 20" fig leaf, and a record of 38% accuracy on its picks. Name pretty much any attribute you'd want to avoid in an analyst, and JMP has it.
OK, perhaps I'm overstating the case. After all, JMP has gotten some calls right:
|
Company |
JMP Said: |
CAPS Says (5 Max): |
JMP's Pick Beating S&P by: |
|---|---|---|---|
|
Beazer Homes (NYSE: BZH) |
Underperform |
* |
83 points |
|
Hovnanian (NYSE: HOV) |
Underperform |
* |
68 points |
These suggest that the analyst at least has a firm grasp on the housing sector. Well ... that's what it suggests until you see the following, along with a couple of other choice calls:
|
Company |
JMP Said: |
CAPS Says: |
JMP's Pick Lagging S&P by: |
|---|---|---|---|
|
Lennar (NYSE: LEN) |
Outperform |
* |
62 points |
|
KB Home (NYSE: KBH) |
Outperform |
* |
48 points |
|
Starbucks (Nasdaq: SBUX) |
Outperform |
*** |
25 points |
|
Sierra Wireless (Nasdaq: SWIR) |
Outperform |
**** |
21 points |
Turns out that even in one of the places it's racked up sizable wins, JMP is actually pretty hit-or-miss. Granted, it has chosen some other winners, but its accuracy and low CAPS score show that those are outweighed by the bad calls. As the other excerpts from its record show, the inability to pick winners extends into other sectors as well.
Speaking of excerpts, I happened to notice one particular quirk in JMP's record. You know how yesterday's buy rating on TheStreet.com was described as an "initiation of coverage?" Turns out JMP has been following the stock for a while. (It may have stopped at some point, but if it did so, it failed to inform Briefing.com, our data provider.) And since JMP's earlier coverage on TheStreet.com back in September 2006, it has managed to underperform the S&P 500 by 19 points.
Foolish takeaway
I really don't mean for this column to sound as harsh as it's coming out, but the fact is that JMP has racked up some really sorry stock-picking stats. What's more, based on TheStreet.com's current valuation, I'm afraid JMP is in for more pain. As I described in last month's earnings report, TheStreet.com faces a number of problems, ranging from evaporating free cash flow to an anemic online advertising market, to the possibly imminent departure of its founder and figurehead, Jim Cramer.
Maybe JMP thinks the stock's single-digit P/E ratio prices these risks in sufficiently to make the stock worth a flyer. But to my mind, the fact that net income is nearly four times as large as TheStreet.com's free cash flow (using the last available cash flow statement) tells me this stock is anything but a bargain.
