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 track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
Regular readers of this column know that I don't often agree with Wall Street's ramblings on the investment merits of their favored firms. This week, however, is different. This week, I finally agree with Wall Street's call.

Or actually, two. In a true Two-Fer Tuesday moment, Wall Street stock shop Morgan Keegan initiated coverage on a pair of defense picks -- Lockheed Martin (NYSE:LMT) and General Dynamics (NYSE:GD) -- saying each is destined to "outperform" the market. I agree.

Problem is, I'm not entirely sure what I'm agreeing with.

Speak up, Morgan!
There are few things more frustrating to the individual investor than the one we're faced with today. Morgan Keegan says it likes Lockheed and is positively agitated about General Dynamics, but search as I might, I was unable to find a single major media outlet that knew why it liked the stocks. (On the other hand, if you want to know why I like 'em, a single click will solve the mystery.)

While we're unable to tell you what Morgan thinks, however, here at CAPS we can at least clue you in to how well it thinks. Two-plus years of diligent data crunching here at the Fool reveal that Morgan is pretty darn good at what it does. 53% of the time it guesses, it guesses right (which may not sound like much, but is actually a heckuvalot better than the average), and on average, Morgan tends to beat the S&P 500's returns by better than four points per pick.

A few examples drawn from the defense and homeland security (and, importantly, cybersecurity) spheres:


Morgan Keegan Says:

CAPS Says:

Morgan Keegan's Picks
Beating (Lagging) S&P By:

Cisco Systems (NASDAQ:CSCO)



9 points




5 points

Symantec (NASDAQ:SYMC)



5 points

Raytheon (NYSE:RTN)



(3 points)

In a nutshell, what this table is telling you is that Morgan has a pretty decent track record on the kinds of companies it picked yesterday. Infrared vision specialist FLIR and missile maven Raytheon are the two picks most closely related to Lockheed and General Dynamics. Plus, it's building up a very nice string of wins in the cybersecurity space -- and as I've previously opined, that's one of three areas where I expect we'll see continued strength in military spending. (It's also, incidentally, a space in which both Lockheed and General Dynamics are showing some strength.)

Foolish takeaway
I'm probably biased when I say this -- after all, Morgan's latest two picks, when paired with its so-far-underperforming Raytheon rec, mimic my own top three defense picks as laid out last month. But to my Foolish eye, Morgan's recommendations in the defense sphere are all significantly cheaper than Boeing (NYSE:BA), and less debt-laden than United Technologies. Simply put, and in my humble opinion, Lockheed, General Dynamics, and Raytheon offer the most compelling valuations in the defense sphere.

While I cannot say with any assurance that this is why Morgan has picked 'em, I can say without hesitation: I agree with all three.

FLIR Systems and Symantec are Inside Value recommendations.

Fool contributor Rich Smith owns shares of Boeing, bought back when things looked a whole lot better for the aerospace giant. He tells you this by way of explanation -- not as an encouragement to do the same -- and because The Motley Fool's disclosure policy so demands. You can find Rich on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 891 out of more than 135,000 members.