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 on that note, we turn to today's featured upgrade, and ask why ...

JPMorgan Chase loves everybody
What is it with JPMorgan Chase this week? On Tuesday, the megabanker upgraded shares of General Electric (NYSE:GE). Its theory being that, like every other too-big-to-fail company that didn't (fail), GE's stock must soon rise from the dead.

A day later, JPMorgan came out with an even more controversial upgrade of recession-wracked shipper UPS (NYSE:UPS). And now we learn that JPMorgan has put its stamp of approval on the airlines, of all things -- specifically, UAL Corp. (NASDAQ:UAUA) and US Airways (NYSE:LCC).

Investors gamely tagged along, bidding up both of these stocks, and adding 5% to the market cap of Southwest (NYSE:LUV), 12% for AMR  (NYSE:AMR), and 11% for Delta (NYSE:DAL). And perhaps that's the right call. In many ways, airlines do move in tandem -- raising prices and instituting new fees when they see rivals doing likewise, or locking arms, OPEC-style, to ... fight the Organization of Petroleum Exporting Companies. So maybe what's good for one airline's goose will work just as well for another's gander.

Or maybe not
Problem is, I suspect investors are overreacting to JPMorgan's upgrades -- and more importantly, missing the fact that at the same time that JPMorgan praised UAL and US Air, it panned two of their rivals. It's not often you see a stock react to a downgrade by rising in price -- but this is precisely what happened to AirTran and JetBlue yesterday. AirTran eased up half a percent; JetBlue, more than 2%.

How does JPMorgan love thee? Let me count the ways
While JPMorgan believes air travel will begin to revive in 2010, it's worth highlighting the banker's reservations about what happens between now and then. JPMorgan justifies its upgrades for AMR and US Airways, for example, primarily by saying it believes the companies can avoid filing for bankruptcy protection. Says the banker, their cash levels appear "adequate." That's not to be confused with good.

If I may say so, that's hardly a ringing endorsement.

Watch your step, JPMorgan
But even if JPMorgan had given the kind of blank-check approval to the airline industry that many investors seem to think it did, I would still have to wonder why anyone would listen to the advice. JPMorgan doesn't exactly have a reputation for air supremacy, you know.

In fact, over the three years we've been tracking this banker's picks, JPMorgan has recommended airline stocks no fewer than 40 times -- and it has guessed wrong nearly 60% of the time. Add up the number of percentage points by which these separate recommendations have outperformed or underperformed the S&P 500, and JPMorgan is staring at a staggering 270 points worth of cumulative underperformance of the stock market.

So to sum up:

  • JPMorgan upgraded only two airlines yesterday: UAL Corp. and US Airways.
  • It also downgraded two more: AirTran and JetBlue.
  • Which together does not add up to an endorsement of airlines in general. Plus, the analyst predicted that despite small improvements, 2010 would prove to be a "lackluster" year for the industry in general.
  • And even if JPMorgan had argued that every airline out there was a buy, you'd still be better off avoiding them entirely, rather than following this analyst's advice.

I hope that clarifies things for you.

Foolish takeaway
We've said it before. We'll say it again: Beware of steel and airlines.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating about stuff he does understand under the handle TMFDitty, where he was recently ranked No. 614 out of more than 140,000 members. United Parcel Service is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.