This Just In: Upgrades and Downgrades

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

And speaking of the best ...
Early yesterday, the Wise Men of UBS downgraded shares of U.S. Steel (NYSE: X  ) from neutral to reduce. Why does UBS think the steelmaker is all rusted out? Basically, for three reasons:

• First, U.S. Steel got bid up in the first place on rumors that Germany's ThyssenKrupp was negotiating to buy the industrial icon. Now that ThyssenKrupp has denied it is doing anything of the sort, UBS sees no reason for the shares to retain their strength.
• Second, in the unlikely event that the Germans do come calling (or the perhaps more likely event that they're just being coy about their intentions), UBS has already crunched the numbers and found little upside in U.S. Steel's shares. Applying the same multiple to earnings that Ipsco (NYSE: IPS  ) just got from SSAB Svenskt Staal (about 7.6 times EBITDA), UBS sees 4% upside max.
• Worse, UBS sees considerable downside risk. If U.S. Steel's shares command only the 5.5 EBITDA multiple that Arcelor Mittal (NYSE: MT  ) paid to acquire its first name last year, then the shares could tank.

Sour grapes, you think? UBS is just upset that since dropping its buy rating on U.S. Steel in August 2006, the steelmaker's shares have surged 87%? You think the Swiss just want revenge? Perhaps. But before passing judgment on UBS's motives, let's take a look at its record and see if there might be some method to its madness.

As regular readers of this column already know, UBS may not be the best stock picker on Wall Street, but it's pretty darn good. The banker boasts only a modest 53% accuracy rating, but a strong CAPS rank of 93.73. Focusing on its underperform calls in particular, here's how UBS has done at calling a dog a dog over the past few weeks:

	UBS Says:	CAPS Says (Out of 5):	UBS's Pick Beating S&P By:
Delta Air Lines (NYSE: DAL  )	Underperform	*	13 points
Dow Jones (NYSE: DJ  )	Underperform	*	1 point
Methanex (Nasdaq: MEOH  )	Underperform	**	(6 points)
Agco (NYSE: AG  )	Underperform	*	(7 points)

Within the steel industry, however, UBS has a decidedly mixed record. It made an astoundingly good call in endorsing Ipsco last September, balanced out by an astonishingly bad call on Nucor that same month.

Considering the banker's hit-or-miss record in this industry, I wouldn't count U.S. Steel out just yet. In fact, when you consider that the firm trades at a P/E discount to industry peers like Steel Dynamics and Nucor, U.S. Steel could well prove UBS wrong once again.

Who has a record on U.S. Steel that's as good as UBS's is bad? Find out on CAPS -- and learn what this mystery stock picker thinks about the steelmaker today.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 1,377 out of over 30,000 rated players. The Fool has a disclosure policy.