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." Here, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

And speaking of the best …
Are smartphones the future of computing? A lot of folks think so, and thanks to the wonders of the stock market, you have almost as many possibilities to bet that they're right. Pick a stock (any stock) -- Apple (Nasdaq: AAPL) and its magical iPhone; Motorola Mobility with its upstart Droid; Micron and Samsung, which provide solid state memory for the gadgets; TriQuint and Texas Instruments, which make the phones' innards; and dozens of others besides. Chances are, if you're right about smartphones in general, you'll make some money on your favorite way to play the trend. Of course, the very best way to make money on smartphones is to buy shares of communications IP powerhouse InterDigital (Nasdaq: IDCC)

… or so says Barclays Capital.

Yesterday, Barclays initiated coverage of InterDigital, calling the company "well positioned to capitalize on mass market adoption of 3G devices as well as … 4G through the licensing of its standards-based IP portfolio." InterDigital promptly did its best to prove Barclays right, reporting earnings a few hours after the upgrade, beating analyst revenue projections and beating modestly on earnings.

Quarterly static notwithstanding, Barclays sees a grand long-term future for InterDigital, which the banker praises as "a leading play in the industry." And in the medium term, too, Barclays sees every hope for the stock to outperform. This summer, bankrupt Nortel's patent portfolio goes up for auction, with everyone from Apple, Google, and Research In Motion (Nasdaq: RIMM) to Huawei and ZTE expected to participate. Barclays says the bidding frenzy will "heighten focus on wireless IP as a vital and differentiating asset." And seeing as wireless IP is InterDigital's bread and butter, this can only mean good things for InterDigital.

Good things come in pairs
InterDigital shareholders will doubtless also be pleased to hear that Barclays has a superb record picking stocks like InterDigital. Indeed, there aren't a whole lot of investors out there with records superior to Barclays'. This top-5%-ranked stock picker outperforms all but a handful of the investors we track on CAPS.

And Barclays is no slouch of a communications equipment stock picker, either. Fact is, this analyst has managed to outperform the market on an astounding 70% of its recommendations in the industry, headlined by a rocking 485-percentage-point winner in Hughes Communications (Nasdaq: HUGH):


Barclays Rating

CAPS Rating
(out of 5)

Barclays's Picks Beating
S&P by

Hughes Outperform *** 485 points
F5 Networks Outperform *** 365 points
Ciena Outperform ** 106 points (picked twice, and both times right)

Source: Motley Fool CAPS.

Suffice it to say, then, that when an analyst like Barclays throws its support behind a stock like InterDigital, I sit up and listen -- and you should, too. What's more, there are plenty of objective reasons to like this stock in addition to Barclays's endorsement.

Chief among them: the price. Costing less than 17 times earnings today, InterDigital looks at worst fairly priced if it can achieve Wall Street's consensus projection of 17.5% long-term profits growth. But InterDigital could do even better than that. According to Barclays, the company could earn as much as $3 a share this year, and more in 2012, if it succeeds in signing up LG for a license renewal. Factor in the $12 net cash on the company's balance sheet, and Barclays believes the stock is worth $56.

Foolish postscript
Valued on InterDigital's pre-earnings price, this suggests potential upside of 16% on the stock. New investors, however, look like they may score an even better deal, as Wall Street responds to the report by selling off the stock. Here's hoping yester-evening's pessimism continues long enough to give you a chance to buy this stock on the cheap.