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 worst and sorriest, too.

And speaking of the best...
CAPS All-Star analyst Bernstein waded into a sea of pessimism to call a bottom on the sagging shares of Fifth Third Bancorp (Nasdaq: FITB) last week. Bearish on the bank for all of the last year, Bernstein now thinks the worst of the damage has been done, and downside risk should be minimal. Hence, Bernstein lifted its "underperform" rating on the stock, and promoted it to "market perform."

Let's hope Bernstein is right. Fifth Third has lagged the market by a good 20 points over the past year, making this pick -- appropriately -- the fifth most successful call we have on record for Bernstein at CAPS. Bernstein has only done better with Nortel (NYSE: NT), Vodafone, ASML Holding, and Celgene (Nasdaq: CELG) -- yielding the analyst 38, 31, 26, and 23 points, respectively.

But is it?
I actually think Bernstein is calling things right this time. Sure, it recently made a very bad call on Merrill Lynch (NYSE: MER), rating it an outperformer in May and getting 17 points' worth of market underperformance for its trouble. But overall, the analyst's record is pretty darn good:

• Its September 2006 thumbs-down on Fifth Third was brilliant.
• Bernstein made a similarly great call when it endorsed asset manager Ameriprise (NYSE: AMP) just one month after panning Fifth Third.
• Third and finally, Bernstein boasts a top-decile 92.69 CAPS rating and a 69% record for accuracy, both superb by any measure.

Remember, Bernstein isn't saying you should buy Fifth Third. It's just encouraging you to stop selling it. I'm not terribly impressed with a couple of the bank's metrics; return on equity and on assets are mediocre at 12.6% and 1.1%, respectively. Ideally, a bank should be making more like 20% and 1.5% before I'd buy it.

All the same, consider the positives. Fifth Third's price-to-book ratio is very close to my cutoff of 2.0. Its P/E of 16 approximates the average for Midwest regional banks. And while two of its closest rivals, US Bancorp (NYSE: USB) and National City (NYSE: NCC), saw their revenue decline last quarter, Fifth Third's actually grew by a couple of percentage points. On balance, I agree with Bernstein that the downside from this point is pretty limited.

But that doesn't mean you have to agree. Down by one-fifth over the last year, do you think Fifth Third will fall another third before this subprime mess ends? Come on over to CAPS and tell us why.

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 No. 433 out of nearly 65,000 rated players. Vodafone is an Inside Value newsletter recommendation. US Bancorp and National City are Income Investor selections. The Fool has a disclosure policy you can take to the bank.