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

And speaking of the best ...
Spring is in the air, and with it, all the season implies. Flowers a-growin', raindrops a fallin', and ... the bankers are in love. Yesterday, it was amour as Deutsche Securities batted its eyes at three of the biggest names in investing -- Nasdaq OMX (NASDAQ:NDAQ), along with money managers Franklin Resources and Invesco.

But love is a fickle thing. While Deutsche initiated coverage on these three stocks with "buy" ratings, it also found one stock not at all to its liking (another money manager, Legg Mason). Meanwhile, by far the biggest group of stocks Deutsche is now covering received neutral ratings. A few recipients of this "kiss your cousin" buss:

  • Charles Schwab (NASDAQ:SCHW)
  • CME Group (NYSE:CME)
  • E*Trade (NASDAQ:ETFC)
  • IntercontinentalExchange (NYSE:ICE)
  • NYSE Euronext (NYSE:NYX)
  • TD Ameritrade (NASDAQ:AMTD)

In all, Deutsche initiated coverage on 16 financial-sector stocks yesterday, from which I infer that some poor analyst didn't get a whole lot of sleep the last few nights. The question for investors today, though, is whether we can take Deutsche's advice and sleep soundly ourselves. To answer that query...

Let's go to the tape
I'll cut right to the chase: No, I don't think you can take a lot of faith in Deutsche's opinions on these stocks. Why not? Well, start with the analyst's record. We've been tracking Deutsche's performance here on CAPS for almost three years now and, well, the news isn't good.

Despite having one of the biggest names in finance itself, Deutsche's record as a stockpicker falls a pfennig short of 50-50. Put another way, if you flip a Deutsche mark, call "heads" you buy a stock, "tails" you sell, chances are you'll outperform Deutsche Securities.

What's more, Deutsche doesn't appear to have any particular insight into the industry in which it operates. You see, although it initiated coverage on these 16 stocks just yesterday, it did in fact follow several of them in years past -- with the following results:


Deutsche Says:

CAPS says:

Deutsche's Picks Have Beat
(Lagged) S&P By:

Charles Schwab



38 points

CME Group 



9 points

Nasdaq OMX 



3 points




(12 points)

NYSE Euronext 



(25 points)




(53 points)

Based on this record, I think you'll understand if I'm a bit skeptical when Deutsche tells us to buy Nasdaq today. You see, according to Deutsche, Nasdaq's "current valuation [and] relative risk/reward" are just too good to resist. How good, you ask? Good enough that the analyst sees a "10%+ upside over the next 12 months."

Just 10%?
Yeah. Just 10%. As in, about the same pace as the average annual gains of the stock market at large. Yet Deutsche recommends buying into this whopping 10% gainer despite "mixed volumes and pricing/market share pressures," and "headwinds ... in U.S. cash."

Now, I've no desire to bash Nasdaq. In fact, I actually agree with Deutsche Securities that of the stocks named above, Nasdaq offers the closest thing to a quality stock at a fair price. Selling for a 16 P/E and with the consensus of Wall Street predicting the stock will grow its profits at nearly 15% per year over the next five years, the stock doesn't look terribly overpriced.

Still, it seems to me you could get at least as much potential reward, and with a whole lot less risk by just buying an S&P index fund. Seems to me that Deutsche Securities should know that... but that after spending all the time necessary to survey 17 stocks, it would have felt foolish to emerge from the exercise and admit it hadn't found a single good deal in the financial sphere.

Foolish takeaway
Me, though, I'm just a Fool. I've no compunction against telling you I believe there's no great bargains to be found in any of these stocks, and that you're better off investing elsewhere.

In fact, I just did.

NYSE Euronext is a Rule Breakers pick. Charles Schwab is a Stock Advisor recommendation. Legg Mason and Nasdaq OMX Group are Inside Value picks and the Fool owns shares of Legg Mason.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find Rich on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 855 out of more than 135,000 members. The Motley Fool's disclosure policy performs well in any market.