The Five Dumbest Things on Wall Street This Week

4. Pipe Dream

If a picture is worth a thousand words, how do you value a well-placed upgrade?

This week Friedman Billings Ramsey (FBR) upgraded Compudyne (CDCYE) to market perform, citing a stronger-than-expected first-quarter gross profit performance.

The timing certainly struck us as odd. It came just days after Compudyne posted a first-quarter loss, citing "depressed revenue" and "continuing operating challenges." The company called its integrated electronic systems results "disappointing." Worse yet, Compudyne said it had received a delisting notice from Nasdaq that it was planning to appeal.

But in its report on the security systems manufacturer, Friedman Billings says it believes Compudyne's stock is "currently at a bottom" and in position to benefit from future gains. And indeed, Compudyne shares are up 14% since then. FBR, which didn't return a call seeking comment, duly noted in the report that it "seeks to perform investment banking and other services for various companies" and to get paid for those services.

Of course, it's those services that got the bad blood flowing in the first place. Compudyne hired Friedman Billings four years ago to handle a $12 million stock sale. FBR shocked Wall Street this year by saying the firm and three top executives may have engaged in insider trading with regard to the 2001 deal. Martin Roenigk, Compudyne's chairman and chief executive, told TheStreet.com last month that the company "feels damaged and intends to pursue whatever remedies will result from that."

Compudyne's Geoffrey Feidelberg said Thursday that the company continues to evaluate its options. He shrugged off the upgrade, calling it an example of the companies doing "business as usual."

As nice as the upgrade was, it doesn't sound like it's going to smooth anything over.