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 ...
Everyone has their own priorities. As most of America was defrosting their turkeys, rummaging through the silverware drawer for the cranberry-can opener, and assembling all the fixings for the 2010 annual stuffing-fest, Wall Street wizard Morgan Keegan was initiating coverage of a new defense stock. Force Protection (Nasdaq: FRPT), which builds mine-resistant, ambush-protected vehicles, to be specific.

That's good news for Force Protection investors in one respect. According to Morgan Keegan, you should buy Force Protection today because its shares will be worth about $6 apiece by this time, next year. And while $6 may not sound much, it should be good for about a 16% profit off of today's purchase price. Unfortunately, what we really want to know about Morgan Keegan's outperform recommendation -- the why? of the initiation -- remains a mystery.

There are few situations more frustrating to the individual investor than knowing your stock has been upgraded, but not knowing why -- or whether there's any basis for the upgrade at all. Sadly, the mainstream media outlets are keeping mum on the details of Morgan Keegan's upgrade (or perhaps the analyst was just too shy to share them). But while we cannot tell you precisely what the analyst is thinking about Force Protection, here at CAPS we can at least give you some insight into how well it does its thinking.

Let's go to the tape
First, a bit of background about Morgan Keegan. One of the best analysts in the business, Morgan Keegan consistently ranks within the top 10% of investors we track on CAPS. The analyst is particularly strong in two sectors:

Oil, Gas and Consumable Fuels
Given its druthers, Morgan Keegan would really rather be drilling for oil. There's no other industry that gets more attention from the analyst, and while Morgan Keegan isn't always right on its oil picks (in fact, it only gets 'em right about 50% of the time), it tends to win so big when it does guess right that I suspect most investors would be willing to forgive its near-misses. Morgan Keegan's January 2009 recommendation of MarkWest Energy Partners (NYSE: MWE) has racked up well over 100 percentage points worth of market outperformance, while its dissing of GMX Resources (Nasdaq: GMXR) earlier this year was also right on the money -- and good for another 54 points of outperformance.

Hotels, Restaurants and Leisure
Less favored by Morgan Keegan (19 recommendations versus the 36 it has for Big Oil), the hotels and restaurants space has been even luckier for the analyst. Of its recommendations in the industry, 60% hit the mark, and Morgan Keegan has been rewarded for sticking with casual restaurateurs Panera Bread (Nasdaq: PNRA) and Darden Restaurants (NYSE: DRI) all the way through the Great Recession. Both of these Morgan Keegan recommendations have beaten the market by margins of 100 points or more.

Jack of all trades, master of some -- just not this one
Unfortunately for Force investors, however, Force Protection doesn't drill for oil (though its armored cars have spent so much time in Iraq, perhaps it should give the idea some thought). Nor does it serve up tasty sandwich fare. Rather, Force is a defense stock, plain and simple -- and defense is one area in which Morgan Keegan has pretty consistently missed the mark.

Three out of four Morgan Keegan defense recommendations underperform the market, and on average, investors who've followed Morgan Keegan's advice in this industry have lost money as a result. General Dynamics (NYSE: GD), Raytheon (NYSE: RTN), Lockheed Martin -- nearly every defense bargain Morgan Keegan has spied turned out to be a mirage. Sad to say, I'm beginning to suspect the same may be true of Force Protection.

Why is that? Well, consider the rout of an earnings statement Force Protection delivered in its latest quarter. The company "missed earnings" by a mile and its sales were cut nearly in half. Free cash flow simply evaporated. About the only good news the company had to report was that one of its big armored car contracts (in England) has not been canceled -- the consummate "no news is good news" story.

An indefensible valuation?
Even with that contract intact, of course, most analysts expect to see Force Protection grow its earnings at only about a 10% annual clip over the next five years, which may not be enough to support the company's premium P/E. At 16 times earnings, the company costs even more than Morgan Keegan's other defense favorites -- General Dynamics at 10.4 times earnings, Raytheon at 9.6, and Lockheed Martin at a bargain-basement 9.3. Worse still, Force Protection is in the red on free cash flow, burning through the stuff rather than generating new cash to fill its coffers.

My advice: If you absolutely, positively must take advice from Morgan Keegan, stick with the company's oil and restaurant picks.

While it's possible Morgan Keegan has some secret knowledge of Force Protection, something capable of overcoming the presumption that it's truly as bad at picking defense stocks as its record suggests, I don't see it. Until the analyst reveals the details of why it's recommending the stock, there's simply no reason to follow its advice on Force Protection. The record isn't there. The valuation isn't, either.

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 was recently ranked No. 634 out of more than 170,000 members. The Motley Fool has a disclosure policy.

General Dynamics is a Motley Fool Inside Value choice. Panera Bread is a Motley Fool Stock Advisor selection.

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