(FORTUNE Magazine) – When we set out to assemble this year's team of FORTUNE All-Star Analysts, we had a single question in mind--a question, in fact, that we broached in the pages of this magazine less than six weeks ago: "Can we ever trust Wall Street again?" Clearly the Street has a credibility problem. Though it's unfair to pin all the blame for crashing stock prices on research analysts, there's no question that a large number of investors feel burned by the very people they were counting on for information. And in truth, they were burned--by shoddy research. The final years of the late bull market, we now know, were less about spreading new-economy virtues than about old-fashioned boosterism.

Alas, even now the problem is with us. Witness the fact that the average analyst has remained unrepentantly bullish in the face of tumbling stock prices and a less-than-certain economic climate. According to data compiled by Chicago-based Zacks Investment Research, out of the 26,451 current ratings issued by nearly 3,000 stock researchers, only 213--0.81%--are pure sells. That's no typo.

Which brings us back to our overarching question about Wall Street. Who can we trust? Is there anyone in the sprawling field of stock research who does the job the way it's supposed to be done--with intellectual honesty, vigor, and independence? Are there analysts who refuse to simply parrot a company's "guidance," who bravely downgrade in the face of overwhelming investment banking pressures to "think positive," and who don't buckle when the inevitable sneers (and threats) come hurtling back? Yes, there are. Though some work for the big Wall Street names, quite a few are scattered at smaller firms, far from the clubby confines of Manhattan's Wall and Broad Streets. What's more, as you'll see in our second annual list of FORTUNE All-Star Analysts, we think we've found the very best of the lot. Not only have these eight men and two women displayed remarkable candor and insight in their published research, they've also been awfully good at picking stocks. In good markets and bad ones, that's what counts most of all. Our All-Stars' portfolio--the total record of every buy, sell, and hold recommendation--rose an average 44% last year. That compares with an average of -2% for their competitors.

How did an analyst make it onto the team? Our formula was part quantitative, part qualitative. First, we drew up a list of industry sectors that have been particularly newsworthy of late and which are likely to be relevant to investors in the coming years (autos, drugs, e-commerce, energy, financial services, household products, media/entertainment, retailing, and semiconductors). Next we asked Zacks, which helped us with last year's rating, to calculate the percentage gain or loss for every analyst in those sectors on the basis of his or her daily stock recommendations.

Then came the hard part. Seeking feedback from dozens of portfolio managers and Wall Street veterans, we scoured the records and research reports of the analysts with the leading batting averages in each sector. Our aim wasn't merely to see how they posted such blistering returns, but to see how willing they were to take tough stands--as when Sanford Bernstein's Faye Landes slammed the entire e-commerce sector at the height of the dot-com bubble. The result is a team of analysts that can hit for both accuracy and power. Here, our 2001 FORTUNE All-Stars--and their picks for the coming year. (For more information--as well as a look at our European and Asian All-Star Analysts--click on www.fortune.com/allstars.)

With his desk covered in charts, Michael Bruynesteyn is on the phone, doing what appears to be a Dragnet impression. In a deep, barely modulated voice reminiscent of Joe Friday's, the Prudential Securities researcher fires a relentless stream of questions at the chief financial officer of a prominent auto parts manufacturer: "What's your estimate for North American vehicle production?" he asks. "How do you plan to allocate the cash you are generating?"

The executive doesn't hold back. He knows that Bruynesteyn, a former head of investor relations at General Motors, can work his way past corporate spin like a Porsche around a tight corner. Shortly after the call, Bruynesteyn begins comparing the comments with industry production records in his database. A week later he issues his no-nonsense report: Hold off on buying the stock.

Meet the new auto ax. Last year, out of 22 auto analysts, Bruynesteyn alone posted a positive return on his recommended stocks--up 22%, compared with a 10% decline for his average competitor, according to Zacks. Among his winning moves: He told investors to buy up GM shares in January 2000, at $72. His hunch was that the market hadn't fully factored the value of GM Hughes into the stock price but would soon do so. He was right. By May, shares were at $93. He then cut his rating to "neutral" after noticing that insiders were beginning to unload shares. The stock dropped back into the 60s, and by November reached a 52-week low at $48. "We made a lot of people a lot of money on that call," he crows.

Cocky, yes. But Bruynesteyn is renowned on the Street for his straight-shooting approach. Consider what he's been telling investors about DaimlerChrysler. Though the company has been a disappointment since Daimler-Benz and Chrysler merged in 1998, many analysts continue to recommend buying shares. Not Bruynesteyn. In March he slapped a sell on the automaker. The downgrade followed a road show the company had staged to convince analysts that a turnaround was near. Bruynesteyn listened to the pitch, then went back to the office to crunch the numbers. Using the company's own forecasts, he calculated that non-Chrysler divisions would have to grow earnings an impossible 50% in 2002 to meet the turnaround goals. Notgonnahappen, he said. Shares fell 10%.

Since joining Prudential in 1998--after eight years at GM--the Canadian-born Bruynesteyn, 38, has displayed an uncanny combination of industry knowledge, market savvy, and a willingness to issue decisive directions to clients. And right now, that market savvy is telling him to be careful. Though lower interest rates have supported auto sales, the outlook for GM, DaimlerChrysler, and Ford is dampened by rising unemployment, a breakdown in consumer confidence, and spiking energy prices. At the same time, the slow-growing Big Three are continuing to feel market pressure from imports (see "Eat Our Dust"). In fact, Bruynesteyn doesn't have buys on any of the Big Three. His favorite investment isn't even an automaker, but GENTEX (GNTX), a company that makes rear-view mirrors. With an 85% share of the market for self-dimming mirrors, Gentex has 20% profit margins and no debt. And it's on a path to grow profits at a 15% annual rate. Just the kind of numbers that can comfort investors riding along a bumpy road.

Brian Postol is not accustomed to the glare of Wall Street's glamour game. No, sir. This St. Louis-based retail analyst always buys suits on sale, often using an additional 10%-off coupon. His favorite store is Sam's Club. His meal of choice is chicken and rice. And his employer, A.G. Edwards, is known for its Leave It to Beaver values.

But Postol has been able to spot blue-light specials in the stock market faster than a blue-haired grandma at Kmart. "Brian," says Steven Dray at Strong Capital Management, "is on the shortlist of analysts I keep."

How good is he? How does a 126% gain in 2000 vs. the 5% loss posted by the average retail analyst sound? Nor is he a one-year wonder: In 1999 his picks rose 65%--again, in a tough market for retailers. So how did he do it?

Postol, 33, is customarily shy about his success. But institutional investors who benefited from his guidance are not. They point to his decision in late 1999 to upgrade Bed Bath & Beyond. Postol published a report suggesting that home furnishings, with high profit margins and the most robust growth outlook in retailing, would be the stocks to own--and Bed Bath & Beyond was the best of the bunch. He rode the stock to a 29% gain last year while other analysts were jumping behind Home Depot and Costco--two stocks Postol had downgraded. Sure enough, Home Depot and Costco dropped 33% and 12%, respectively.

He also scored points by downgrading Williams-Sonoma to a "hold" after a strong run. A visit to one of the company's premier Pottery Barn locations last summer revealed that its new Christmas line was, as Postol puts it, "not very Christmassy." After his rating cut, the stock fell 50%. "I'm always looking for accelerating or decelerating trends," he says.

Today that retail trend line is pointing down. Consumer spending, he says, is likely to weaken as a result of losses investors have suffered in the stock market as well as higher energy costs, high debt levels, and rising unemployment. He doesn't expect an uptick until next year. That doesn't mean he hasn't noticed a bright spot or two. In fact, he recently turned positive on Home Depot and Costco--sensing that they are now at bargain levels--and he's betting that shares of MICHAELS STORES (MIKE), the largest retailer for home decor, will rise over the next 12 months. The company's investments in new monitoring systems for inventory and distribution should boost efficiency, and its redesigned stores are more customer-friendly. Plus, he says, at 14 times forward earnings estimates, the stock is trading below its sustainable 20% profit growth rate. As Postol sees it, "The home is still the place that has the best growth in front of it."

Call him the iron man of Wall Street. Year after year Judah Kraushaar not only plays in every game, he hits in every game. When FORTUNE readers first met the financial services researcher a year ago, the All-Star offered this prescient advice: Tread cautiously, he warned, because the end of the capital markets boom will be a huge drag on shares of brokerages and global banks. He figured Citigroup and Bank of New York would be safe bets in a downturn. He was right. As many big firms struggled, BONY climbed 12%, and Citi rose 11%.

A defensive stance was certainly a good idea. Investing in banks and brokerages has been a bit like taking swings against New York Yankee ace Roger Clemens. The last year has been painful for financial services investors--a period in which big banks and brokers gave back much of their gains during the bull market. Underwriting and advisory deal flow has dropped 42% in the most recent quarter--a dismal figure compounded by a 16% decline in trading revenues. Meanwhile, major regional banks now find themselves writing down billions of dollars in problem loans.

Luckily for investors, they've had this Merrill Lynch researcher scouting out sliders and curve balls before they get to the plate. The 43-year-old posted a 30% return on his stock picks last year against a 15% industry average. He's the only researcher to rank consistently among the top stock pickers in both the brokerage and banking categories. "This is a time when you've got to ask much tougher questions about how to invest," Kraushaar says.

And where are those queries leading him? Ever the contrarian, his favorite stock is J.P. MORGAN CHASE (JPM). Given that the company has reported a 30% decline in quarterly earnings amid the capital markets slowdown--as well as its $10 billion in loan exposure to risky telecom companies--many analysts have been steering investors away from the stock (see "Rebuilding the Rock"). But Kraushaar argues that Chase's large customer base, huge amount of capital, and high-margin operations such as M&A and underwriting could make it the next bulge-bracket giant. Says the researcher: "To tell you the truth, I'm actually feeling more bullish right now than I have in a while."

Admittedly, e-commerce is not a sector that inspires confidence in the accuracy--or, for that matter, legitimacy--of Wall Street analysts. After all the cheerleading for now-defunct dot-coms, like eToys and Pets.com, it's no wonder the average analyst in this group recommended stocks that fell a mind-numbing 76%. Which makes the accomplishments of Faye Landes, Sanford C. Bernstein's online retailing analyst, all the more remarkable. Out of more than two dozen researchers in the sector, this outspoken whiz was the only one who didn't lose money for investors last year. She broke even by telling investors that not a single stock was worth buying--an All-Star call if ever there was one.

How did she manage such a feat? When other analysts were still telling investors to buy e-commerce stocks last summer, Landes came out with an Aug. 9 report that took the sector to task. A veteran researcher of consumer-oriented companies, she reckoned there should be no difference between the standards for evaluating an Amazon.com and a Home Depot. She applied this approach--blasphemy to Internet believers--throughout the summer while preparing to launch coverage of the sector. She examined balance sheets and held focus groups to determine what consumers thought. What she found might sound obvious now, but at the time it was devastating news: Industry leaders Amazon and Priceline.com had huge name recognition but minimal brand loyalty. In one bold swoop, she told investors to sell Amazon and avoid Priceline and eBay.

Landes didn't stop there. Long a skeptic of New Age metrics and tantalizing price targets, she issued her own targets for how much each stock could decline based on a discounted cash flow model. Amazon, then $34, was worth less than $21, she said. She slapped a $22 target on eBay, then a $50 stock, and added that Priceline, trading at $27, wasn't worth $14. The three bellwethers fell near or below those targets by late December. Landes saved her institutional investors incalculable sums.

Such boldness is classic Landes. As the top-rated apparel researcher at Salomon Smith Barney in 1997, she accurately predicted trouble for footwear giant Nike--much to the annoyance of the firm's management, which publicly scolded her only weeks before issuing the first of many profit warnings. Later, after joining West Coast investment bank Thomas Weisel, where she had hoped to divide her time between research and private-equity financing, she reportedly clashed with superiors over how to cover e-commerce. She was fired. Convinced that the kind of rigorous analysis she wanted to do was possible only at a firm that didn't depend on a steady flow of banking deals, she went to Sanford Bernstein, a famously independent research-only shop.

Landes, 41, hasn't softened one bit on e-commerce. Forget about Priceline altogether, she says. And Landes still considers AMAZON.COM (AMZN) overpriced. "Sell it," she proclaims. The one bright spot is eBay, perhaps the only truly defendable e-commerce brand. But ask her whether it's worth its $18 billion market cap and she chuckles, "It's trading at more than 30 times our 2005 estimates--that makes it one of the most expensive stocks there is. Period."

Think of UBS Warburg's household products researcher as the quicker picker-upper. Andrew McQuilling has managed to identify trends faster than anyone else in his sector--a fact that led to his being the only analyst in his group to post a positive return in 2000.

Here are two more exhibits for the record: First, in January 2000, McQuilling slashed his buy rating on Procter & Gamble, sensing that an escalating detergent war with Unilever and rising prices for raw materials would cut into profits--undermining the already overvalued $110 stock. Within two months the company issued a stunning profit warning that sent shares on their way to a 52-week low of $53.

The second move came last July. By then most analysts were warning investors not to fool with household products stocks. They worried that earnings shortfalls at P&G, Colgate-Palmolive, and other consumer giants were the result of limited pricing power and deteriorating margins. McQuilling, 35, examined global sales figures and came out with his own theory. Instead of blaming a shift in fundamentals for the weakness, he fingered six years of a strong dollar and a rolling emerging-markets crisis that began in early 1998. Despite the appearance of weakness, he said, industrywide demand for razor blades, detergent, and tissue paper had actually been growing at a 6% to 7% clip based on local currencies. Yes, currency was taking away a chunk of the paper profit, but that was a far less worrisome story than a more fundamental breakdown. Besides, he said, prices were too cheap to avoid. So, with many stocks down 50%, McQuilling told investors to get in. "Buy Kimberly Clark," he said. "Buy Colgate-Palmolive." He even upgraded P&G. By the end of the year, the lot had soared an average 27%.

"It was clear to me that household products were a value sector again," he says. And how. McQuilling's upgrade hit the sweet spot of a rebound. For the year, his overall recommendations were up 16%, according to Zacks. What's more, he continues to see value in the sector. In particular, PROCTER & GAMBLE (PG), trading at $64, is poised to benefit from easier sales comparisons in the second quarter, internal cost savings, lower raw-material prices, and new-product development, he says. "While the company clearly has issues to work through," McQuilling adds, "we believe these will be addressed successfully over the coming year and that P&G's earnings growth should return to double digits in 2002."

Meet the Benedict Arnold of semiconductors. Last July, Salomon Smith Barney's chip researcher committed tech treason: In a blistering report, Jon Joseph predicted that National Semiconductor, Texas Instruments, and others would suffer from excess supply and a plunge in the demand for chips. He downgraded the sector--including investment banking clients like Advanced Micro Devices and Silicon Storage--from "outperform" to "neutral," essentially telling investors to get out fast. And there were no favorites to protect: "Virtually every company I downgraded had a corporate-finance relationship with my company," he says.

To describe the call as unpopular would be the understatement of the year. For a while, the longtime bull knew what it was like to be a dartboard--heckled by rival analysts at Morgan Stanley and Lehman Bros. and called a traitor by angry institutional investors. Word quickly spread that Joseph, 46, a former journalist, was hungry for publicity. Things soon became much worse for the researcher when a handful of individual investors began e-mailing him death threats so convincing that Salomon hired an armed guard to protect Joseph and his colleagues in their San Francisco office. "I got to see the underbelly of humanity, and it was not pretty," he recalls.

Joseph didn't seem to mind the isolation. He had always been an outsider. As a 19-year-old he hitchhiked to Alaska from San Francisco, surviving a rough winter in a log cabin he built for himself 60 miles from the nearest town. During his college years he lived on a commune in Northern California before moving to Japan and becoming a journalist. Even his approach to covering chips is unorthodox. Where other analysts are consumed with micro issues in technology and manufacturing processes, Joseph is equally fanatic about the business cycle. Understanding the ebb and flow of supply and demand played a major role in his July call by helping him recognize that a drop in orders from the wireless sector was just the first of many signs of weakness.

Besides, he was right. Tech spending did collapse, particularly in wireless, as he had predicted. Between July and December the benchmark chip index fell 51%. Advanced Micro and Silicon Storage fell 63% and 57%, respectively. National Semi dropped 65%, and Texas Instruments 28%.

Then, on April 11, just when everyone seemed to agree the market was lousy, Joseph reversed course. He upgraded the chip sector, including Intel and TI. He argued that the cycle's bottom had arrived. Shipments by component suppliers were falling 50% quarter-over-quarter and distributors were reporting a 65% sequential decline in demand. At the same time, he noted that personal computer inventories were in better shape--suggesting that as demand for components increased, chip stocks would prosper.

Despite having been on target last summer, Joseph was pummeled again by critics. "A bottom to semiconductor-industry fundamentals is still at least a quarter away," Merrill Lynch's influential Joe Osha informed investors. Yet within six weeks the chip index had gained 35%, and some rival analysts began inching up their ratings.

Joseph still sees strength in the sector. In particular, he sees a strong outlook for ANALOG DEVICES (ADI), which has consistently posted superior top-line growth and margin expansion. It now trades at around $50. "I'm not paid to follow the herd," Joseph says. "I'm also not paid to be bold and wrong. I'm supposed to be bold and right."

It's the revenge of the old economy--long-forgotten energy stocks posting Nasdaq-like returns. (Nasdaq circa 1999, that is.) Amid a power crisis in California and soaring prices at the pump nationwide, the industry hasn't seen such robust numbers since the 1970s. Which raises a delicate little question: Aren't we due for the boom to go bust? No one has an answer yet, but you can bet this is going to be one bumpy ride. Good thing Greg McMichael is at the wheel.

A former oil industry executive himself, and the son of a Chevron geologist, this A.G. Edwards researcher follows exploration and drilling companies--perhaps the wildest stocks outside of dot-coms. Companies spend millions searching for natural gas or oil. If they find it, hallelujah. If they don't, bye-bye. Somehow, investors who tracked McMichael's recommendations have yet to see the well run dry. His stock picks rose 112% last year, according to Zacks, a figure made all the more impressive by his 91% advance in 1999. What's his secret? McMichael has the eye of a wildcatter and the risk aversion of an accountant.

For evidence of his skill, consider the moves he made on Key Production, a natural gas explorer with operations in Louisiana and Mississippi. In November 1999 he rated the stock a buy and watched shares leap from $9 to $20. Like a pilot guiding a plane through the Rockies, the Denver-based researcher then anticipated a nosedive and downgraded the stock to "hold" in June. He had recognized that the company's finding costs had mysteriously jumped 50% above the industry average, a potent drain on earnings. The stock plunged to $14 by August--when, again, he upgraded to a buy, because of its low valuation. With shares at $30 in December, he cut his rating for the third time in a year. Care to guess what he did in February with shares at $19? Yep.

McMichael, 52, is now placing his bets on REMINGTON OIL & GAS (ROIL), a Dallas-based explorer that has been growing its proven reserves at a 35% annual rate and has an impressive one trillion cubic feet of potential offshore gas reserves. With its track record for successful drilling and low costs, he believes Remington will profit during what he expects to be a surge in demand this summer.

Not that all the news is so upbeat for the energy sector. Indeed, though forecasts are for higher prices and continued strong earnings, there are also some issues bubbling up--like the fact that the number of natural gas rigs has risen to 990 from 400 in 1998. But McMichael isn't yet worried about a supply glut. Yes, it's possible that ramping up production--the likely outcome if the Bush energy plan goes into effect--could create such an oversupply, but demand remains very strong. Nevertheless, McMichael says, predicting the future in this industry can be tricky: "This is not a sector for long-term investors."

Entertainment analysts often have personalities as big as the media barons they cover. They're born dealmakers--the kind of dress-white players you'd find on the tennis courts with Sumner Redstone or Rupert Murdoch.

Someone ought to tell that to Jill Krutick. The 38-year-old Salomon Smith Barney analyst is so soft-spoken and reserved that she'd have an easier time passing for a den mother than a mogul. Which might help explain why she was the top-ranked researcher in the entertainment sector last year. By focusing on a combination of big-picture trends and microeconomic events, she managed to pick stocks that rose 9% in 2000, vs. a 13% decline for the average analyst, Zacks reports. Behind that gain were timely calls on Crown Media, which nearly doubled after she initiated coverage last May, and Disney, which she recommended in the low 30s. When it rose into the 40s, she lowered her rating. Disney has since fallen 25% from its 52-week high.

In a tough climate for advertising, Krutick recommends buying shares of VIACOM (VIA). The company draws revenue from a diverse mix of topflight brands--from TV broadcasters CBS, MTV, and Nickelodeon to radio giant Infinity Broadcasting to a variety of publishing and entertainment concerns--sheltering the company from the sluggish advertising environment that has cast a shadow over other media companies. Its first quarter results actually improved on last year's first quarter, beating Wall Street's expectations, she says. Viacom's revenues will rise to $25 billion this year from $23 billion in 2000, with after-tax cash flow jumping to $3.3 billion from $2.7 billion.

What makes Ken Kulju the best drug-stock researcher? His travel agent might have an answer. When FORTUNE caught up with Kulju in mid-May, he was halfway through an eight-day trip that would take him to eight cities from San Francisco to New Orleans in search of details about promising new drugs. The two-time All-Star from Credit Suisse First Boston spends nearly half his time on the road, going to medical conferences, meeting with doctors, and getting face time with researchers as well as executives at drug companies. He's logged 700,000 miles in the past few years.

Jet lag aside, Kulju has made picking stocks look as easy as choosing chicken or fish. It isn't, of course, which makes the numbers this 43-year-old researcher has been posting all the more remarkable. In a sector where the average analyst picked stocks that went up 24%, the total return of Kulju's stock recommendations last year was 94%. Even more impressive is that he has a six-year average annualized return of 100%, according to Zacks. Among his home runs in 2000: drugmaker Biovail (a pick he gave FORTUNE readers last year that rose 66%), generic leader Barr Laboratories (up 249%), and Dura Pharmaceuticals (up 133%), a drug-delivery system maker that was taken over by another of Kulju's favorites, Elan (another FORTUNE pick, which gained 58%).

Kulju's secret? He's been able to combine the knowledge gained from all those lengthy road trips with a database that documents the number of prescriptions written by doctors for more than 74 major drugs in 14 therapeutic categories. More recently, Kulju has developed a proprietary cash-flow screen to identify companies that are trading at a discount to their cash-flow growth. Among the names that have popped up on his computer screen is AMERICAN HOME PRODUCTS (AHP), a company with a deep line of drugs used to treat hypertension, depression, gastrointestinal disorders, and rheumatoid arthritis, a rich product pipeline--and which is trading at a valuation comparable with its competitors' despite superior profit growth. Could this help Kulju three-peat as an All-Star? Stay tuned.