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'll be tracking the long-term performance of Wall Street's best and brightest -- and worst and sorriest, too.

And speaking of the best ...
Goldman Sachs started the week off with a downgrade -- and of none other than Motley Fool Rule Breakers pick Secure Computing (NASDAQ:SCUR). Explaining why it demoted the stock from a "neutral" rating to a "sell," Goldman cited conversations with representatives of unnamed tech companies working in the government contracting space, who confided to Goldman that the Feds haven't been spending as freely as they might have hoped in Q1.

Even though Secure gets only 17% or so of its business from Uncle Sam, Goldman worries about a significant amount of revenue that never materialized in Q4 of last year. This revenue, which was expected to appear in Q1 as sales "slipped" from one quarter into the next (and which investors are counting on come earnings season), may slip yet again, and get pushed off into Q2. Although the firm maintained its 12-month-out price target -- suggesting it believes the sales will eventually go through -- Goldman seems to feel there's a risk that Secure will miss estimates in the short term.

Leaving aside the issue of Goldman's short-term focus -- that's to be taken for granted when dealing with Wall Street analysts -- what's the likelihood that Goldman is at least making the right short-term call here? On the one hand, you've got unsourced scuttlebutt; on the other, you've got my fellow Fool Tim Beyers, who recommended the stock to Rule Breakers investors back in October, reassuring them that Secure's "sales frequently close in the last few days of the quarter." If that's the case, it would seem to diminish the importance of weak sales earlier in the quarter.

Goldman's past performance
How accurate has Goldman been with its recent picks? To check on that, we turn to Motley Fool CAPS for, er, a reCAP.

What we find is that, despite its respectable CAPS rating of 90.03, Goldman is far from infallible, making the wrong call roughly 45% of the time. Focusing on the tech space in particular, here are a few of the more high-profile calls it's blown since CAPS began tracking the firm:

Still, it's made some good ones as well. For example:

While its record may be mixed, when you consider the alternatives on Wall Street, Goldman stacks up pretty well against the competition. On a lark, I took a look at the records of the two firms that have most recently contradicted Goldman's call and named Secure a "buy": Lazard Capital and Soleil. Lazard, with its 75.49 CAPS rating and 50% accuracy, gets its calls wrong as often as it calls things right. Worse still is Soleil -- its 48% accuracy means it's usually wrong, and its CAPS ranking of just 35.27 means it's performing worse than 15,000-odd other investors on CAPS (precious few of whom work as professional stock analysts).

All in all, it's a pretty mixed picture if you ask me. Goldman's record is impressive, but far from perfect. Meanwhile, the people contradicting it haven't been winning any prizes for steering investors right lately -- except for one.

Yes, there is one analyst out there who both disagrees with Goldman and has a better CAPS record to back up his judgment. That Fool would be Tim Beyers himself, who, in his capacity as TMFMileHigh on CAPS, has racked up an enviable score of 95.56 and an accuracy rating of 56% -- better than all three of the named Wall Street firms on both counts.

To find out what Tim has to say about Secure Computing, just click on over to Secure's CAPS page, where his comments are posted for all the world to see.

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 39 out of more than 24,000 raters. Symantec is a Motley Fool Inside Value pick. The Fool has a disclosure policy.