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 ...
Buy low, sell high. It's the most famous mantra on Wall Street, and it appears to be the driving force behind Citigroup's decision to recommend buying Exxon Mobil (NYSE:XOM) yesterday. According to Citi, Exxon's "recent pull-back ... offers investors the opportunity to buy the highest quality integrated energy assets at a reasonable price."

But price isn't the only thing behind Citi's buy rec. The analyst practically gushes praise for the oil company, extolling its "low risk integrated business model, low cost of capital, superior industry returns and ... strongest balance sheet not only in the energy space but also in the S&P 500 (AAA rated for 90 years)." And while Citi acknowledges the risks inherent in staking a claim in an industry rife with "extreme volatility ... over the last 18 months," on balance, it thinks the price is right, right here, right now.

But is Citi right?

Let's go to the tape
Judging from the firm's placement in the 89th percentile of investors tracked by CAPS, you might think the answer is "yes," case closed. But look a little closer, and what you'll find here is an analyst with an almost precisely 50-50 record of guessing right on which stocks will outperform, and which stocks will underperform, the S&P 500.

On balance, superior winners like ...

 

Citi says

CAPS says

Citi's Pick Beating S&P By

SunPower

Outperform then Underperform

***

70 points then 31 points

Energy Conversion Devices

(NASDAQ:ENER)

Underperform

***

36 points

Massey Energy

Underperform

****

13 points

... have Citi ahead of the game right now, with its average pick outperforming the rest of the market by about one percentage point. But the fact remains that this banker is wrong almost precisely as often as it's right -- in oil as in other industries:

 

Citi says

CAPS says

Citi's Pick Lagging S&P By

Arch Coal  (NYSE:ACI)

Outperform

*****

38 points

Halliburton  (NYSE:HAL)

Outperform

****

28 points

Peabody Energy  (NYSE:BTU)

Outperform

*****

18 points (two calls)

Drilling into Exxon
But its record aside, what about the fundamentals of Citi's Exxon pick? Clearly, Citi thinks Exxon's a quality operation -- and I'm inclined to agree, at least initially. Exxon boasts operating profit margins superior to several other oil companies: Better than BP, Conoco (NYSE:COP), or Chevron (NYSE:CVX), for instance.

Problem is, profit margins alone don't make this stock cheap. Nor does the fact that Exxon's stock price has come down 22% over the past 12 months.

Oh, I'll grant you that with a 7.7 P/E, and analysts calling for 7.4% long-term profits growth, Exxon looks pretty good on the surface. But before you act on that impulse, I'd urge you to drill a little deeper. Examine Exxon's cash flow statement, for example, and you'll soon see that despite reporting $45.2 billion in profits last year, this incredibly capital intensive company generated "only" $40.4 billion in free cash flow.

Nor was this phenomenon a fluke. Fact is, in nine of the past 10 years, Exxon's accounting profits outstripped actual free cash flow -- sometimes by as much as 10% to 15%. There's no two ways about it, folks. It's eye-popping and headline-grabbing billion-dollar paydays notwithstanding, Exxon simply is not as profitable on a cash basis as it looks.

Foolish takeaway
As we've learned to our sorrow in recent months, just because Citigroup had the reputation of being a good banker did not make it anything of the sort. And just because Exxon's shares look fairly priced, does not mean they are. In investing, the rule remains: At all times, caveat investor.

Oil companies have long paid healthy dividends. To find others doing the same, take a free trial to Motley Fool Income Investor.

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. 588 out of more than 130,000 members. The Fool has a disclosure policy.