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 its worst and sorriest, too.

And speaking of the best ...
One day after Cowen & Co. cut earnings estimates for stocks across the solar sector, fellow equity overlord Thomas Weisel responded with a bullish salvo, upgrading shares of Suntech to "market weight" this morning. Is there discord in the ranks of the Wall Street elite?

Not really. Despite cutting earnings estimates for Suntech Power (NYSE:STP), SunPower (NASDAQ:SPWRA), Trina Solar, and Evergreen Solar (NASDAQ:ESLR) yesterday, Cowen still insists that the first three stocks remain "outperformers," while Evergreen is at worst a hold. Weisel, while remaining silent on most of the solar plays, is getting slowly more optimistic, as indicated by its upgrade of Suntech (a Motley Fool Rule Breakers recommendation, by the way). But is that reason enough for you to buy back into the solar industry?

Let's go to the tape
Initial indications aren't good. Neither of these analysts ranks among the stronger stock shops as tracked by CAPS. Cowen goofs on about 55% of its stock picks on average. Weisel does worse; three out of every five companies it recommends underperform the S&P 500. And on those occasions when Weisel does pick a winner, chances are it's not a solar stock:

Cowen's record looks similarly questionable. While most of the ratings it has supposedly made in the solar sector do not show up on CAPS (either because they predate our service, or because Cowen neglected to submit them to Briefing.com for recording, I cannot say), the two recommendations that we do have on record go in different directions. Cowen's lagging the market badly on its Trina rec, while whomping it solidly with its First Solar (NASDAQ:FSLR) pick -- a four-bagger since Cowen recommended it more than two years ago.

I'm seeing solar spots
Personally, I haven't a clue which way solar will go, in the short or long terms. By all rights, baking up mirrors to accept free energy sounds to me like an obvious way to make money. That said, everything I read these days -- whether written by the analysts named above, or by firms like (presently unrated) Hapoalim Securities, which has a much better record in this industry -- is telling me that this industry is in serious trouble.

Spot prices on polysilicon have been tumbling. Credit markets are tightening. And governments in Italy and Spain are balking at the high costs of subsidizing the industry. None of this bodes well for solar investors, I fear.

Considering the obstacles, my instincts tell me firms like Evergreen, Trina, and Suntech, which are all burning massive amounts of cash in their business, are least likely to pull through this mess. The better bets, it seems to me, are First Solar -- which is actually producing (minimal) free cash flow today, and SunPower. Although the latter company's currently burning cash, it's doing so primarily through capital spending that it may be able to ratchet back.

Foolish takeaway
Mind you, I'm not saying either First Solar or SunPower will actually go on to thrash the market. But if you do think that there's a future for this industry, these two appear to offer the best chances of surviving to profit from it.