"Got a quarter? Can you flip it? Congratulations, you're a stock guru."

That's basically the thesis of my recurring "Beat the Street with 25 Cents" column. We Fools know that when a Wall Street firm upgrades a stock, investors are likely to bid the stock price up in response. Conversely, when a big-name analyst pans a company, the stock often drops.

But should it rise or drop? If "80% of mutual funds underperform the market," and if the vast majority of Wall Street analysts get more of their picks right than wrong, it seems odd for us to buy or sell stocks based on their say-so. That's why I use "25 Cents" to clue you in on the most clueless stock analysts.

The dirty half-dozen
However, some analysts hog all the attention in "25 Cents." Historically, firms like Maxim Group and Next Generation have occupied two of the bottom seven slots of the Wall Street roll call (the "unlucky seven"). That leaves only five spaces open for other lousy stock pickers to fight over -- and that just ain't fair.

To spread the wealth, as it were, we've introduced "Subpar Analyst Showdown" with the intention of pointing the spotlight a bit higher up the ladder. Here, we illuminate a few better-known Wall Street names that consistently score below 50% accuracy in their picks. Not as bad as their less-famous brethren, these names will be better known to the investing public.

By deflating the prestige-bubble these firms have undeservingly acquired, I hope to help you sleep better, secure in knowing which big-name firms are more often wrong than right. Here's this month's batch of not-yet-ready-for-prime-time players:



CAPS Rating

One Really Bad Pick

How Bad?*




Yamana Gold (NYSE:AUY)

34 points



Under 20

American International Group (NYSE:AIG)

59 points

Credit Suisse


Under 20

Petroleo Brasileiro (NYSE:PBR)

31 points

JPMorgan Chase


Under 20

Starbucks (NASDAQ:SBUX)

36 points

Friedman, Billings, Ramsey


Under 20

Marvell Technology (NASDAQ:MRVL)

19 points

Calyon Securities


Under 20

Ambac Financial  (NYSE:ABK)

57 points

*Specifically, how badly is this active pick underperforming the S&P 500?

Lies, damned lies, and statistics (Part 2)
Now, the caveats I've expressed before about CAPS hold true for the above firms as well:

  • We do not count ratings on "half-penny" stocks with market caps of less than $100 million or stock prices below $1.50 per share. Counting such picks could help (or hurt) the accuracy of the numbers reflected above.
  • CAPS is still in "beta." Glitches will surface that could affect our numbers. We'll do our best to squash the bugs as we find them, though, and we invite the named analyst companies to help us improve our product. If you have a gripe about your rating and the facts to back it up, we'll work with you to fix the problem. Drop our CAPS feedback board a note, and we'll give your arguments a fair hearing.

There's one more factor to consider in weighing this column's findings. CAPS' has a two-part scoring system, ranking firms (and members) both on their accuracy, and on how greatly each pick beats or lags the market. In theory, an analyst can get two picks wrong for every one right, yet still rank very highly among investors.

For example, it's not enough to be merely less accurate than a coin toss to push an analyst into the CAPS netherworld of an "Under 20" ranking. With many of these firms glomming on to no-brainer winners like MasterCard (NYSE:MA), they need to be spectacularly wrong on their losers in order to reap those winnings, yet still underperform 80% of CAPS investors.

The trick, of course, is to recognize when a winner has stopped being a winner, and it's time to take your chips off the table. I suspect that's why our team at Motley Fool Inside Value recommended selling MasterCard -- and why unlike so many of Wall Street's finest, we're still beating the S&P 500.

Petroleo Brasileiro and JPMorgan are Motley Fool Income Investor picks. Starbucks is a Inside Value recommendation, a Stock Advisor selection, and The Fool also owns shares of it.

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 ranked No. 1669 out of more than 120,000 members. The Fool has a disclosure policy.