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.

Hercules bulks up
By now you've heard the news: Pride International (NYSE: PDE) spinoff Seahawk Drilling (Nasdaq: HAWK) gave up the ghost and filed for bankruptcy protection last week.

I'm calling this good news. Why? Because, in order to raise cash for its creditors, Seahawk agreed to sell its assets -- mainly shallow-water jackup drilling rigs -- to Hercules Offshore (Nasdaq: HERO) at a price my fellow Fool Matt Koppenheffer characterized yesterday as "fire-sale." Jefferies & Co.seems to agree, publicly guesstimating yesterday that Hercules is buying Seahawk's assets for about $0.55 on the dollar. And in fact, Hercules may not even be paying that much.

In its bankruptcy filing, Seahawk claimed its assets were worth somewhere between $500 million and $1 billion. But Hercules is paying only $25 million cash, plus 22.3 million Hercules shares -- a grand total of about $120 million at today's share prices. That's less than a quarter on the dollar, max, and perhaps as little as a dime.

Buoyed by the news -- and by General Electric's (NYSE: GE) announcement that it, too, sees opportunities in the oil patch -- investors bid up Hercules shares by 18% on the news. Analysts are falling all over themselves to praise the deal. Yesterday, no fewer than three Street analysts upgraded Hercules's stock to "buy" (or a similar ratings equivalent).

So far, only one analyst with a public record for its picks -- CapitalOne Southcoast -- has chimed in. You'll no doubt be pleased to hear that CapitalOne likes the deal as well. Or rather, you might have been pleased to hear that until you learned about CapitalOne's record in the oil patch.

Let's go to the tape
When it comes to picking oil stocks, few analysts cram their pockets quite as full as CapitalOne Southcoast. Energy equipment and services stocks comprise Cap1's No. 1 area of coverage, with 42 picks on record over the past four years. The analyst's No. 2 area of interest is oil, gas and consumable fuels. Clearly, Cap1 loves it some hydrocarbons. Problem is, Cap1 isn't very good at picking 'em:



Cap1 Said

CAPS Rating
(out of 5)

Cap1's Picks Lagging S&P by

Transocean (NYSE: RIG) Outperform ***** 35 points
Chesapeake Energy (NYSE: CHK) Outperform ***** 41 points
ATP Oil & Gas (Nasdaq: ATPG) Outperform ***** 56 points (picked thrice)

Over the past four years, Cap1 has made not one, not two, but 81 separate picks in the oil patch. Its record: 60% of the time, it's been wrong on its oil and gas producers. And 55% of the time, it's wrong about the companies that service them. Hardly inspiring. So while Hercules's snapping up Seahawk's assets for literal pennies on the dollar certainly sounds good, investors who know the track record at Capital One just might want to take a step back, and consider what might go wrong with this call.

First off, there's the old "two wrongs don't make a right" argument. Hercules hasn't managed to earn a profit in three years operating on its own. To the contrary, it's losing money and burning cash. Seahawk's not doing much better (after all, there was a reason that Pride got quit of it). So while it's certainly possible that Hercules can improve on things if given the benefit of cheap assets to work with, so far its performance record suggests the contrary. And I'm talking here about performance that far predates what happened to the industry after the Deepwater Horizon disaster.

Granted, Hercules's acquisition of assets at "fire-sale prices" is going to make earning a GAAP profit on these assets easier. But consider what Hercules and Seahawk are currently producing with these assets. Over the past year, Hercules has generated only $17.6 million of free cash flow from use of its own assets. Add Seahawk's drills to the mix, and the combined output of these two asset pools is negative $62.3 million.

Foolish takeaway
Fools, I'm as big a sucker for a going-outta-business sale as the next guy. A bargain hunter to my core, I applaud Hercules for snapping up Seahawk's assets on the cheap. But that doesn't make the stock an automatic buy. There's still room for Hercules to fail -- something to keep in mind, now that the stock's become nearly 20% more expensive than just last week.