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 worst ...
Yesterday was a tough one for investors in general, and for Intel
Unfortunately, the analyst doing the upgrading was Global Crown Capital.
Never heard of Global Crown? No surprise there. Over the two years we've been tracking this asset manager, it's made just 30 recommendations public. That's barely one a month -- a drop in the ocean of ratings Wall Street spews forth daily. But luckily for us, several of the ratings GC has made public relate to semiconductor shops, so we can get some good insight into how well this analyst knows its silicon.
Let's go to the tape
And how well is that? Um, not well. See for yourself:
|
Company |
Global Crown Said: |
CAPS Says (Out of 5): |
Global Crown's Pick Lagging S&P by: |
|---|---|---|---|
|
Qualcomm |
Outperform |
*** |
2 points |
|
Texas Instruments |
Outperform |
**** |
4 points |
|
Xilinx |
Outperform |
*** |
5 points |
|
Linear Technology |
Outperform |
***** |
5 points |
|
PMC-Sierra |
Outperform |
** |
6 points |
|
NVIDIA |
Outperform |
**** |
9 points |
As of Nov. 10, 2008.
You probably already guessed that, right? I mean, when the Nazz drops 1.86%, and a specific stock trading on the Nazz drops right along with it, despite receiving an upgrade -- chances are the analyst making the upgrade doesn't have a whole lot of Street cred.
But I guess that's what you get -- or rather, what Global Crown gets -- for underperforming on a massive scale. According to our records, two-thirds of the time, Global Crown guesses wrong on its stock picks. Its average pick underperforms the market by around three full percentage points, and when stacked up against the rest of the investors tracked on CAPS, Global Crown ranks in the 36th percentile. Hardly enviable numbers.
Yet …
I aagree with Global Crown this time. Sure, the analyst is 1-for-7 on its semi picks -- it got equipment maker Novellus Systems right. But I think GC's time has come with this Intel pick. Here's why:
Right now, Intel is trading for just a little over 11 times trailing earnings, and when it comes to free cash flow, the stock looks even cheaper. Its price-to-free cash flow ratio sits south of 10. Yet analysts as a group expect Intel to grow its profits at nearly 13% per year over the next five years.
Foolish takeaway
I realize we're in a recession and that people are feeling nervous about all sorts of companies' prospects these days. The fact that a not-as-good analyst like Global Crown is calling underperform on Intel doesn't help matters any.
But the facts remain: Intel's sitting on nearly $10 billion in cash, and trading for a price so low that it's well nigh-on ridiculous. I think Intel is cheap.
