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 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 worst and sorriest, too.

And speaking of the best...
Robert W. Baird put its stamp of approval on cyber-security specialist Symantec (NASDAQ:SYMC) yesterday, awarding the stock an outperform rating. As you may recall, Symantec got a severe case of corporate indigestion in the wake of its 2004 merger with Veritas, suffering from everything from a tax complaint against its new prize, to discord within management, to the need to reorganize the two-now-one firms' sales forces. But Baird says all that is behind Symantec now. The company has finally and definitively digested its prize, and is now ready to begin creating some serious shareholder value.

Symantec itself seems to agree. As described by fellow Fool Rich Duprey in his column "Shrink! The Latest Buyback Announcements" earlier this week, the firm recently announced its intention to spend some $2 billion buying back its own shares -- an event generally interpreted as signifying good times ahead. On the other hand, this Fool has taken Symantec to task several times in years past for using buybacks to mask stock options dilution.

So which is it this time? Is Symantec buying back shares in hopes of controlling a rising share count, or because Baird is right, and the firm is poised to capture increasing profits? For a clue to the mystery, we turn to Motley Fool CAPS, and examine how well Baird has read the corporate tea leaves in the past.

Player: Robert W Baird & Co.

• CAPS rating: 54.79
• Accuracy: 51.63%
• Rank: 13,972 out of 30,902

Those numbers may not be as bad as they look, however. When reviewing Wall Street's Wise Men for this column, I often find that even the good stock pickers get more picks wrong than right (i.e., sub-50% accuracy). These higher-scoring players often make up the difference by lucking out with winners that do better than their losers do badly. In Baird's case, the opposite is true -- it's getting more picks right than wrong, but not benefiting much from its correct picks. Perhaps the firm just needs more time for its generally correct guesses to play out, outperform the market, and reward the analyst with a better ranking.

Reviewing a few of the correct picks that the firm will rely on to deliver these higher returns, we find:

Also, it wouldn't hurt for a few of its wrong calls to turn from red to green over time:

Getting back to Symantec
I have high hopes for Baird's Symantec endorsement in particular. The firm continues to generate strong free cash flow -- $1.25 billion over the last 12 months. Weighing the resulting price-to-free cash flow ratio of 14 against analysts' estimates of 13.5% long-term growth, the stock looks fairly priced, absent significant improvement in its business. If Baird is right that improvement is just around the corner, then the stock could actually be undervalued.

And it's not just me saying that, either. Over at the Fool's premier deep-value-hunting service, Motley Fool Inside Value, our analysts also give Symantec the thumbs-up. Despite signs of continued "weakness in the data management business, formerly Veritas; a greater share of enterprise maintenance contracts than expected, resulting in deferred revenue; and higher costs of an internal enterprise resource planning implementation," these diamond-in-the-rough-seeking Fools believe the stock remains significantly undervalued. To find out exactly how undervalued, and learn our recommended buy-in price, all you need to do is click here and grab yourself one of our patented 30-day free trial offers.

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. 1,780 out of nearly 31,000 raters.