It's not very often investors get a chance to put some of these analysts on the spot and find out just how bright or clueless they really are. Two months ago, three prominent software analysts weighed in with their best short-term picks and now it's time to face the music.
Back in early July, Inter@ctive Investor called software analysts at 10 different brokerage firms, asking if they'd like to participate in our little experiment. Most passed on the opportunity for a variety of reasons. The three analysts who graciously accepted the challenge should be commended for their guts if not their stock-picking abilities.
Each analyst was asked: Which of all the software stocks you follow has the best potential for growth in the next six to eight weeks?
Bill Epifanio, an analyst at J.P. Morgan made perhaps the most conservative selection, picking Microsoft Corp. (Nasdaq: MSFT) at $92 a share. While no one can really fault Epifanio for picking Microsoft, it was hardly a bold choice.
The fact that it was up to only $95, and $3 of that came during Friday's run-up, is even less impressive.
Thomas Berquist, an analyst at Piper Jaffray, had by far the worst choice of the three. He "loved" Concur Technologies Inc. (Nasdaq: CNQR) at $38 a share in early July.
Concur did rally for a couple days, moving up to $41 and change immediately following Berquist's recommendation. But things quickly fell apart.
The maker of Intranet-based employee-facing applications that extend automation to employees went into a free fall in August. By Friday, it was hovering right around $25 a share.
In fact, it would seem Berquist must have been the last to know about this stock considering it went from $26 a share in late June to $41ish in early July before collapsing. Thanks for the tip.
Finally, there's Dain Rauscher's Marshall Leisten.
Leisten chose BEA Systems Inc. (Nasdaq: BEAS) at $27.50 a share in early July. It's now trading at $25 a share. Not a bad drop, but certainly not what anyone would call a "best pick."
On Aug. 17, BEA Systems reported a second-quarter loss of $2 million, or 3 cents a share, on record sales of $103 million. That was a tad better than most analysts predicted.
The stock did shoot up above $32 a share about one week after Leisten made this call. However, BEA, like so many other technology stocks, had a rough August.
So there you have it. Three men brave enough to make their picks public. Not a winner among them.
Obviously, the market's chilly behavior in August and late July was a big part of the reason these stocks regressed or remained flat. And there's every reason to believe two or maybe even all three of these stocks will eventually surge well beyond their July price levels.
The other analysts who refused to go on record with their "best picks" might have had some winners.
But no one will ever know.
We do know, for better or worse, that these three analysts have the backbone to make a pick and stand by it. That's a good start.