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." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given that, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We 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.

Longbow loves everybody
It's Wednesday, the sun is shining, and it's a great day to own semiconductor stocks. Any semiconductor stock at all, in fact, according to ace stockpicker Longbow Research. Already a devoted fan of such big chip names as Intel (Nasdaq: INTC) and NVIDIA (Nasdaq: NVDA), this morning Longbow initiated coverage on a raft of smaller players in the industry -- Intersil (Nasdaq: ISIL) and Linear Technology (Nasdaq: LLTC), Volterra Semi (Nasdaq: VLTR) and Maxim Integrated (Nasdaq: MXIM). For good measure, Longbow even tossed a new "whale" into its boat, adding Texas Instruments (NYSE: TXN) to its scorecard.

The most interesting thing about these companies: Longbow loves 'em all. Each and every stock it began covering today got a shiny new "buy" rating. And Longbow just might be right.

Times change ...
Now, mind you, I don't agree with all of Longbow's recommendations. Buying Texas Instruments, for example, might have been a good idea back in October 2009, when I actually recommended the stock (with the share price up 46% since, I dare say that was good advice). But in the months since, TI has become less and less of a bargain, and I'm also not particularly enthused about the valuation at Volterra.

And in fact, I suppose a lot of folks will be unimpressed with today's Longbow recommendations. Why, just look at the prices on these stocks:


P/E Ratio

5-Year Expected
Growth Rate

PEG Ratio

Texas Instruments


10.0 %















56.5 (!)



 ... but value doesn't
Not a one of 'em sports the kind of valuation that a traditional "PEG" value investor would call attractive. But here's the thing: Sometimes, you need to dig a little deeper than the surface level P/E ratio to find value. Sometimes, appearances can be deceiving. And as it turns out, that's the case with Longbow's recommendations today. Do that extra digging, and what you'll find is that three of Longbow's recommendations are actually a whole lot cheaper than they look when valued on the cash profits they produce -- their free cash flow.

While TI and Volterra generate less cash than "meets the eye," a review of Maxim's cash flow statement shows the company to be trading for only 14.2 times the amount of free cash it produces in a year. Linear Tech (a Motley Fool Stock Advisor recommendation) sports a 13.8x price-to-free cash flow ratio, and Intersil sells for the low, low price of just 12.1 times free cash flow. In this regard, the three companies resemble previous Longbow picks of NVIDIA and Intel -- both of which also churn out more cash than their income statements might suggest.

Foolish takeaway
Relative to their growth rates, this makes Maxim, Linear, and Intersil all look significantly more attractive than their PEG ratios appear. But the real kicker here is the fact that each of these companies pays dividend yields that are simply outstanding. While TI offers investors only a 1.5% dividend yield, and Volterra pays no dividend at all, Linear offers its shareholders a generous 2.9% payout on its stock, while Maxim yields 3.3%. Best of all, Intersil offers a whopping 4% dividend to any investor willing to look past its apparent overvaluation, to find the value that lies beneath.

Digging for value -- it's just one of the ways Longbow manages to outperform 97% of the investors we track on CAPS, and earned itself the rank of one of Wall Street's Best analysts.

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's currently ranked No. 516 out of more than 170,000 members. The Motley Fool has a disclosure policy.

Intel is a Motley Fool Inside Value recommendation. Linear Technology and NVIDIA are Motley Fool Stock Advisor selections. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel. The Fool owns shares of Texas Instruments.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.