This Just In: Upgrades and Downgrades

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 ...
Some days, it just doesn't pay to get out of bed ... log on to Briefing.com, and post your latest stock picks. HSBC Securities is discovering that this week, as its perfectly reasonable decision to downgrade Boeing (NYSE:BA) yesterday got trampled in the rush of investors heading the other way.

On any other day, the reasons to sell Boeing would be legion. The company's unprofitable. It's beset by Pentagon budget cuts on the one hand, and self-inflicted wounds from the 787 fiasco and labor union discord on the other. So you can certainly understand why HSBC would advise investors to sell the stock this week. Problem was, the day HSBC issued its "sell" rating was the very same day that Boeing's rival for the KC-X Tanker contract announced its intention to pull out of the contest and hand the victory to Boeing (under certain conditions.) Result: Instead of moving toward HSBC's $45 price target, Boeing stock has gained 3.6% since the downgrade happened.

D'oh!
Indeed. This isn't at all the outcome HSBC had expected, I imagine, and it won't do much to improve this banker's limited record of success in the aerospace sector. Better known in the mining and semiconductors industries -- where it's enjoyed some success ...

... HSBC's exposure to aerospace stocks has to-date been limited to one bad bet on Elbit Systems, and one luckier guess on Chartered Semi. As such, its decision to downgrade Boeing was questionable from the get-go. It looks even moreso in light of Northrop Grumman's (NYSE:NOC) threat to pull out of the KC-X Tanker contest.

A Northrop withdrawal would virtually assure Boeing $40 billion in initial revenue from building the first tranche of air refueling tankers. If Boeing went on to build out the full fleet, its revenue could easily soar past $100 billion.

So is HSBC wrong?
Not necessarily. After all, there's a reason this banker ranks in the top 10% of investors tracked by CAPS. As I explained earlier today, I do not believe Northrop will in fact pull out. It's invested millions in the effort to secure the KC-X contract, and it will not simply wave the white flag and surrender without a fight.

To the contrary, I believe Northrop is laying the groundwork for an appeal after it bids for KC-X, loses the contract to Boeing, and then ... appeals the decision. In which case, far from being just months away from notching a super-valuable contract win, Boeing investors are more likely in for a months-long -- and perhaps years-long -- political knife-fight.

Meanwhile, Boeing's cash is still dwindling, its revenues falling, and the 787's first test-flight still more a hope than a Dream.

Foolish takeaway
Seems to me, HSBC's sell-thesis remains intact -- and Boeing bulls are in for some turbulence.