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.
And speaking of the best...
What do you do when one of the best investors in the business suddenly initiates coverage on one of the hottest sectors in the investing world? Me, I listen up. And what I heard yesterday is this:
"Wall Street Best" investor Barclays Capital just started coverage on the solar sector. On Monday, the Brit banker weighed in on a cool half-dozen of the biggest names in solar. But here's the really interesting thing: Barclays doesn't seem to like much about 'em at all.
Barclays rated each of China Sunergy
Sad to say, Barclays compounded the disillusionment by not providing (or at least, not providing to any of the mainstream media who announced the news) any rationale for why it likes Yingli, hates Solarfun -- or anything in between. But far be it from us at CAPS to let a little thing like a complete lack of detail throw us. Thanks to CAPS' quick work at "initiating coverage" of its own when Barclays began making its ratings public on CAPS last year, we're well placed today to give you an idea of how well the banker's ratings could work out in the months and years to come.
Let's go to the tape
Based on Barclays' performance so far, I have every confidence that investors may do well to buy Yingli -- and to avoid the rest of the stocks Barclays is now warning against.
Why? Because the odds favor Barclays. Since we began tracking it, this banker's been getting fully 60% of its stock picks right, and simply beating the market averages with a stick. Any given Barclays pick, it appears, is likely to outperform the rest of the market by a good 6 points, based on what's gone on so far.
Some do worse, of course. But some do even better. Notable in the latter category, I would say, is Barclays' January recommendation of Corning
Deconstructing Yingli
And I must say, it's a good thing Barclays is so good at what it does. Because left to my own devices, I'd have a really hard time figuring out what to do with these stocks. Take Yingli. (Please.) Like many other firms, it does not release a cash flow statement with its quarterly earnings release, leaving me at a loss as to just how profitable the firm really is. Even locating basic quarterly GAAP data on the company is a tedious exercise in digging through SEC files, randomly clicking "6-K" filings in hopes of finding something useful.
My most recent efforts in this regard produced the following information on the company:
- Yingli has about $178 million in cash on its balance sheet against $396 million in short- and long-term borrowing and $182 million in convertible notes.
- It appears to sell for about a P/E of 8, based on trailing earnings of about $99 million.
- And according to most recent guidance, the company expects to grow its sales this year by a minimum of 96%.
Foolish takeaway
Eight times earnings on a 96% grower? Sounds just a little too good to be true, doesn't it? So it's a good thing we've got an analyst as talented as Barclays assuring us that it is true, right? Nonetheless, I'd sure like to see a cash flow statement before investing.
