Is Prudential Securities a bull market indicator?

A year ago, the brokerage division of Prudential Financial ( PRU - Get Report) was one of the more bearish outfits on Wall Street. Its 54 analysts had "sell" recommendations on 6% of the stocks they covered -- well above the Street's overall sell rating on just 1% of stocks.

Since then, however, the Dow Jones Industrial Average has fallen 14%, the S&P 500 is off 20% and the Nasdaq Composite is off 26%.

But with doom and gloom pervading every corner of the market and a growing number of Wall Street analysts discovering the word "sell" in their dictionaries, Prudential analysts are sounding a lot less pessimistic on stocks -- even if they aren't outright bulls either.

Prudential's analysts currently list just 11 stocks, or 2% of the 500 companies they cover, as ones to sell.

Side of Mayo

Most of Prudential's sells are due to one particularly bearish analyst, Michael Mayo, the firm's well-known bank analyst, who has sell ratings on six stocks: Citigroup ( C - Get Report), Bank One ( ONE - Get Report), Comerica ( CMA - Get Report), Keycorp ( KEY - Get Report), PNC Financial ( PNC - Get Report) and National City ( NCC).

By contrast, Thomson Financial/First Call reports that the percentage of sell recommendations on stocks at Wall Street firms has soared to 7.3% as the bear market has deepened.

Indeed, the number of bearish analysts is mushrooming on Wall Street as brokerages begin to comply with a new Securities and Exchange Commission regulation that requires them to essentially lists stocks as either a buy, hold or sell -- or some other three-tiered variant that's easily decipherable by average investors.

So is this a case where the folks at Prudential see something in the market's future that the rest of the Street is missing? Perhaps.

Always Darkest

Stephen Buell, Prudential's director of equity research, says the firm's more upbeat tone simply reflects the view of its analysts and market strategists that the worst is over for the stock market and the broader economy. He notes that some of the firm's analysts were out in front last year predicting stocks to fall further.

"We have passed the worst," says Buell. "We are in a period somewhere between a moderate and robust recovery."

Many Prudential analysts have removed their sell ratings because share prices on some stocks have fallen so far that they can no longer be called overvalued, says Buell. And it's only natural for a firm to have fewer sell recommendations at a time it thinks the market has just about bottomed.

Of course, what makes this all so intriguing is that Prudential has been marketing itself as a brokerage firm whose analysts aren't afraid to slap sell ratings on stocks. On the firm's Web site, it says its analysts have "the freedom to call them as they see them."

Buell, however, says the firm isn't trying to win any contests over who can have the most sell recommendations.

Hold Everything

And just because a lot of the stocks Prudential covers are no longer pricey, it doesn't necessarily make them screaming buys, either. Indeed, Prudential's less bearish mood should not necessarily be seen as a reason to race out and buy stocks, at least not yet.

In fact, Prudential, with buy recommendations on 41% of the stocks its analysts cover, still lags behind the rest of the Street. First Call reports that overall, Wall Street brokerages lists 54% of the stock market as a buy.

The biggest change at Prudential is in the number of stocks it now lists as ones to hold -- essentially a neutral position. The firm recommends that investors stand pat on 56% of the stocks it covers, up from 49% a year ago and well above the 38% figure cited by First Call for all brokerage firms.