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 ...
Wall Street megabanker JPMorgan Chase did its level best to end the rally in Mosaic
Let's go to the tape
Listen, I'm not going to sit here and tell you that JPMorgan is the best banker in the business -- it isn't. Fact is, after tracking its performance for more than two-and-a-half years on CAPS, we've established that JPMorgan gets more than half of its picks wrong.
It still outperforms the market overall, of course. But it does so by picking relatively better -- rather than vastly more -- winners than losers. JPMorgan-recommended "buys" like CNOOC
Mosaic has turned into one of these winners as well, more than doubling off of its November lows up until today's downgrade. But Mosaic's time has passed, as I see it.
As fellow Fool Toby Shute pointed out yesterday: "business for fertilizer producers like Mosaic kind of stinks right now." Peer producers like Potash
Time to get out of the hole
Fertilizer digger-uppers have bounced high off of their November lows, no doubt. This has helped me, personally, reap huge (virtual) gains by recommending that investors buy Mosaic. But before you try to jump on this train today, consider the basis for that advice -- the situation has changed.
Back in October, when I gave Mosaic the "thumbs-up," the stock boasted $2.2 billion in trailing free cash flow, and analysts were looking for 9% long-term growth from the company.
No more. According to Mosaic's latest 10-Q filing with the SEC, free cash flow generation fell off a cliff and now sits at just $330 million so far this fiscal year. Run-rate that number out to see what Mosaic might produce this year, and we're looking at barely 20% of the free cash flow that had me so excited about the stock late last year.
Wall Street has become progressively more bullish on the stock, of course -- but as usual, too little (to reap the full gains from back when the price looked good) and too late -- because the story has now changed. Even analysts' new-and-improved prediction of 11% long-term profits growth fails to justify the stock's current valuation. To the contrary, I expect that this week marked the high-water mark on Mosaic.
Now it's time for the fall.
CNOOC is a Motley Fool Global Gains selection. Shanda Interactive is a Rule Breakers pick. Fool contributor Rich Smith has called outperform on some of these stocks on CAPS, and panned others, but does not own nor hold short any of them in real life.