This Just In: Upgrades & 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 tell you what the analysts said and stop there. No, we're here to hold Wall Street to account. We're going to tell you what the analysts said ... and then show you whether they know what they're talking about. Helping us in this endeavor will be Motley Fool CAPS, our tool not only for rating stocks, but also for rating the analysts who rate stocks. 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 ...
Yesterday morning, Wachovia upgraded the stock of retailer (and Motley Fool Hidden Gems pick) Zumiez (NASDAQ:ZUMZ) from "market perform" to "outperform." In so doing, Wachovia restored its original rating on the stock from back in June 2005. For the long term, Wachovia sees "significant" potential for growth both in store count and earnings. In the shorter term, it likes Zumiez's spring line of merchandise, because it believes the line will appeal to the store's targeted teen demographic.

But does Wachovia know what it's talking about? I mean, sure, the bank has a sterling 99.63 rating on CAPS. And yes, that's good enough to place it in both the top 10% of professional analysts we're tracking and the top 1% of CAPS players overall. It's also true that Wachovia has put together an impressive collection of winning picks so far ...

... not to mention a few less impressive ones.

That's great, but what does Wachovia know about Zumiez? Turns out it does know a little something. Reviewing the firm's record since initiating coverage, we can see that its initial "outperform" rating walloped the market's performance. Zumiez rocketed 94% through April 2006, versus just a 9% gain for the S&P 500. Pretty darn impressive, if you ask me.

Long story short, Wachovia has proved itself one smart stock-picker in general, and it has shown that it has a great handle on Zumiez in particular. I'd think twice before betting against its latest prediction that Zumiez will outperform the market.

Want to see why Zumiez made the cut in our Motley Fool Hidden Gems small-cap newsletter? Try out the service free for 30 days.

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 ranked 40 out of nearly 22,000 raters. The Fool has a disclosure policy.