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 ...
Now here's something you don't see every day. Over on Wall Street, one of the best stock pickers in the business (or at least it used to be) downgraded Furniture Brands (NYSE:FBN) to "sell" this morning -- and the stock went up! Granted, it's not rising quite as quickly as the market at large, which is up 0.5% as of this writing, but still, you'd expect a downgrade from a firm with the pedigree of Stifel Nicolaus to do more than just slow a stock down.

Could it be that investors already know all about the reasons Stifel cites for its downgrade -- that the housing market is slow, that people don't spend much money on furniture when their home equity is vaporizing before their eyes, and that furniture companies are rapidly becoming "middle men," who make their living by buying, rebranding, and reselling products manufactured abroad? (I certainly hope so -- I've written enough about the subject that Foolish investors, at least, should be on notice by now.)

Perhaps, therefore, Stifel is perceived as just beating a dead horse when it panned Furniture Brands today. Perhaps investors know the bad news, think it's already priced into the stock, and are ready to buy in anticipation of some unexpected good news for a change?

Perhaps
But is the news really priced in? Perhaps Stifel knows the worst hasn't yet come for Furniture Brands. For clues as to whether Stifel is right, we turn once again to Motley Fool CAPS, where we're tracking the broker's record.

Gone are the days when Stifel sat in the rarefied upper ranks of Wall Street's Best. Lately, these bankers have counted themselves lucky just to hold on to the title of a CAPS All-Star -- and as of today, they aren't even managing that. At last report, Stifel sported just a 77.49 CAPS rating -- a full 251 basis points away from the 80 rating needed to qualify for the All-Star elite.

Let's take a look at a few of the blown calls that have Stifel trapped down among the plebeian masses of CAPS investors, most of whom don't own a broker's license, much less a whole investment bank:

Of course, it hasn't all been bad news at Stifel -- there's a reason these guys were once among the CAPS elite, you know. And Stifel's still calling a few things right. For instance:

Foolish final thoughts
Stifel may have fallen on hard times in CAPS-land. But when Stifel says Furniture Brands is going down, this Fool, for one, believes it. Not just because of what I've seen and written about the industry, where Furniture Brands' trials and travails are mirrored in the performance of Hooker, Stanley, and Bassett -- but also because I recently polled Foolish investors on the discussion boards at Motley Fool Hidden Gems, hoping to tap the wisdom of our investing crowd on the subject of the future of the American furniture industry.

To learn what they told me, click here.

To learn what the crew at Hidden Gems thinks about the furniture industry in general, and our two furniture-whittling recommendations in particular, click here and claim a free trial membership. And to learn what the very best individual investor in Furniture Brands, as determined by CAPS, thinks about the company, head right this way.

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 currently ranked No. 856 out of nearly 29,000 rated participants. Hooker Furniture and Stanley are Motley Fool Hidden Gems picks. The Fool has a disclosure policy.