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 its worst and sorriest, too.
On Monday morning, Broadpoint AmTech downgraded the world. Details are hard to come by, but Briefing.com is already listing close to a dozen downgrades resulting from AmTech's visit to last week's 2009 Consumer Electronics Show. Notable downgrades include the following drops to sell from neutral:
... as well as less steep downgrades to neutral from buy:
AmTech sees a ghost
Why is AmTech feeling so nervous? Consider this tidbit from an AmTech analyst, quoted on StreetInsider.com explaining the Amazon.com downgrade: "Our tech team came away from last week's CES looking like it had seen a ghost. ... Nearly every one of the 40+ companies we met with were extremely bearish on the near-term demand outlook and noted that they would be cutting their workforces. This bodes very poorly for consumer confidence, which in turn bodes very poorly for [Amazon's first half] outlook. While we realize that investors are aware that 'it's bad out there,' we are not sure they realize quite how bad."
Do you own any of these stocks? Feeling a little nervous yourself? Well, don't panic just yet. You may not want to jump out -- or toss your stock out -- a window on AmTech's say-so. Seeing the number of high-profile downgrades on this list, I looked up AmTech's record on Motley Fool CAPS to learn how well the analyst has been doing on its picks lately.
As it turns out, AmTech's accuracy on recommendations like those listed above leaves something to be desired. Over the two-plus years that we've been tracking the analyst, AmTech has racked up a record of only 40% accuracy on its picks. This broker is underperforming the market by more than three percentage points per pick, and its CAPS player rating ranks in the bottom 20% of investors tracked by CAPS.
I have to say, too, that AmTech's not making a lot of sense on all of today's downgrades. Sure, some of 'em look sound. Amazon.com, for one. The stock's selling for a 36 P/E, which would be pricey even if consensus estimates of 22% long-term earnings growth prove correct. If AmTech is right, though, and consumer spending pulls far enough back to imperil those growth projections, the stock could prove frightfully overvalued.
... and gifts
On the other hand, some of AmTech's new "sell" ratings seem to be overreactions in the extreme. Nokia, for example. The stock's selling for only eight times trailing earnings, despite analyst predictions for average long-term growth of nearly 13%. Even if those estimates prove optimistic, the cell-phone maker offers investors a huge margin of safety at today's price. Why, you could lop a third off of that growth rate and the stock would still look close to fairly priced.
Toss in a 5.1% dividend as a bonus for investors willing to risk AmTech being wrong, and Nokia looks like anything but a sell to me. In fact, while AmTech is selling, I would be buying Nokia.
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Fool contributor Rich Smith actually cannot buy Nokia for 10 days after publication of this column, but he already owns some shares of the company. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's ranked No. 1,769 out of more than 125,000 members. The Fool's disclosure policy listens to Dntel.