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 ...
As the week's trading drew to a close on Friday, growth-oriented equity house Caris relented from its previous "below average" rating on Motley Fool Hidden Gems Columbia Sportswear (NASDAQ:COLM), sighed, and conceded: OK. Fine. The company's "average."

Talk about damning with faint praise! And this was after the company had just finished reporting Q2 earnings on Thursday -- earnings that included record sales, record earnings, a dividend, and raised guidance for the year! (But also, admittedly, below-consensus guidance for Q3.) The superb earnings news and great long-term forecast combined with weak short-term prospects and lukewarm endorsement from Caris to shave 3% off of Columbia's stock price. Ouch.

So what's a Fool to make of all this news? At first glance, the second quarter looked pretty good, and with the stock price down 3% on good news, that makes the shares look all the more attractive. Yet Caris still thinks the shares are at best a "hold." Is the analyst right?

Let's go to the tape
To get an idea of whether Caris is calling this one correctly, we turn to Motley Fool CAPS for a glimpse at Caris' record. We've done this once before already, when we reviewed the company's endorsement of bebe stores (NASDAQ:BEBE) in March. As you may recall, back then, Caris was just barely breaking into the ranks of CAPS All-Stars with its 80.08 CAPS rating and sub-50% accuracy. Well, I've got good news and bad news for you.

Bad news first: So far, it looks as though Caris has blown its bebe call. The stock's down a good 25% since Caris upgraded it, and it's underperforming a mostly flat S&P 500 by 27 percentage points. But the good news is that despite mistiming bebe's bottom, Caris' overall record has improved -- its CAPS rating inched up to 82.25, and the analyst is now getting slightly more picks right than wrong, with an accuracy record of 50.50%.

Here's a look at a few of the calls that Caris has made right since March:

Of course, it made a couple of goofs, too:

I have to say -- while it's good to see Caris improving its record on CAPS in general, I'm a bit put off by its record on clothing stocks in particular. I see nice numbers following Caris's endorsement of Guess? and Men's Wearhouse, but as well as those picks performed, its American Eagle and bebe recommendations have performed pretty badly. On the whole, Caris' performance in this space looks pretty hit-or-miss.

Moreover, on Columbia in particular, the numbers don't seem to justify more than the "average" rating that Caris has assigned the company. With just $108 million in trailing free cash flow, Columbia shares trade for 21 times those cash profits. While not expensive on its face, the 11% profits growth that analysts project for the company makes the shares look richly priced.

Of course, that's just one Fool's view. As I mentioned above, Columbia Sportswear is an active recommendation of Motley Fool Hidden Gems, and it's entirely possible that the analysts over there have a different opinion of the stock. If they do -- if I were you, I'd listen to it. Since Hidden Gems recommended Columbia to our subscribers two years ago, the stock has outperformed the market by more than 12 percentage points. To find out what the Hidden Gems team thinks about the shares today, just claim a free, 30-day trial to the service and check out their most recent update.

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. 759 out of more than 60,000 raters. Dell, bebe stores, and American Eagle are Stock Advisor recommendations. Dell is also an Inside Value selection. Sharper Image is a Pay Dirt pick. The Fool has a disclosure policy.