Whether they're too conflicted, too optimistic, too caught up in protecting their jobs, or just too wrong, professional analysts don't inspire as much awe as they once did. But that doesn't mean they're all bad.
It's no secret that we Fools have a voracious appetite for exposing Wall Street's cheating ways, slick-talking gibberish, and repugnant odor. Not to mention our complete indifference to the upgrades and downgrades these "professionals" assign to stocks at a mind-numbing pace.
They're not all bad
In fairness, though, many analysts are indeed savvy stock pickers. The Wall Street Journal annually celebrates the best analysts and the best calls across industries. Even so, there's simply not enough transparency in the industry to know just who the best and worst analysts are. That's bad for the good analysts; they're unwittingly protecting the sheep.
Until now.
Enter Motley Fool CAPS, our community-intelligence database, which tracks the "outperform" and "underperform" ratings assigned to stocks by individual investors and pros alike. In turn, every stock and every investor earns a rating. That means we can finally answer the age-old question: Which analysts are better stock pickers than my grandmother?
Bet with the best
One pro ranked high atop the CAPS charts is Brean Murray, Carret & Co., a research-driven investment bank headquartered in New York City. As of this writing, Brean Murray is ranked 87th overall in CAPS (and 12th among professional analysts), having crushed the market since last August with 61% accuracy.
The sweetest calls of 'em all
The firm's recent big winners include G-III Apparel (NASDAQ:GIII), The9 (NASDAQ:NCTY), and American Oriental Bioengineering (NYSE:AOB), all of which are up more than a whopping 70% since September. Halozyme Therapeutics (AMEX:HTI), recommended by the firm just two months ago, has risen more than 65% since.
If you're looking to piggyback on some newer picks, know that Brean Murray also rewarded outperform ratings to Advent Software (NASDAQ:ADVS), Komag (NASDAQ:KOMG), and Safenet (NASDAQ:SFNT) within the last month.
Street wisdom worth using
You might have noticed that Brean Murray's recommendations are predominantly small-cap stocks with rapid earnings growth. According to the company's website, Brean Murray's mission is to be the "value-added, actionable 'idea research' thought leader -- the 'axe' -- on every stock we follow. We focus on small/mid cap stocks that the market misperceives, and therefore, misvalues."
That shouldn't surprise anyone; many of the All-Star firms we've featured here also tend to focus on small, obscure, and ignored companies. Investing is about (legally!) boosting odds in your favor; concentrating on stocks too small for Wall Street's big money is one of the most proven ways to do so. Small stocks can provide a double taste of investment heaven: First, they have tons of room to grow, and second, they're so small that their lack of coverage can make them undervalued, too.
In other words, Brean Murray already starts its investment search with a huge -- or should I say small -- size advantage.
This growth is always good
Although Brean Murray offers coverage on various industries, its blockbuster calls within the software, Internet, and biotech sectors account for the majority of its impressive CAPS score. No dull cement mixers, fertilizer stocks, or cargo companies carrying the load for this Wall Street firm -- an approach that flies in the face of my beloved frugals. Arghh!.
But the only reason I'm not a fan of fast-growing tech stocks is because I wouldn't have much chance of actually spotting them before their prices got way ahead of themselves. Brean Murray, on the other hand, seems to have a nose for sniffing out considerable value in these high-growth sectors -- making for another powerful set of investing advantages. In addition, the firm recently established a research presence in China to gain an informational edge on Asia's latest marvels of technology. Talk about scouring the globe for stocks.
Judging from Brean Murray's focus on mispriced, high-flying small caps, and most importantly, its impressive performance in CAPS, this is at least one Wall Street firm that might be worth watching.
Past performance does not guarantee future results
Of course, the caveat here is that we've only been tracking Wall Street picks for a few months now. While we can't yet call the data predictive, it's at least interesting to examine.
If you'd like to take a look at the rest of Wall Street's best and worst analysts and their stock recommendations, click here to join the CAPS community absolutely free. You can also get all kinds of opinions on the stocks you're looking to buy, sell, or hold.
And hey, you might even find yourself surpassing some of Wall Street's biggest and brightest in no time.
The financial community has been opaque for too long. CAPS can change all that.
Foolish contributor Brian Pacampara has never worked on Wall Street, and he has the low blood pressure to show for it. He holds no position in any of the stocks mentioned. The Fool's disclosure policy is always immune to the pressures of evil.
