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 ...
What do you do when one of the best investors in the business upgrades one of the most beaten-up -- and beaten-down -- sectors of the economy? Personally, I listen up. And from what I hear, Blue Horseshoe loves Small Oil.

Blue Horseshoe being, in this case, Bernstein Research. And Small Oil being:

  • Chesapeake Energy (NYSE:CHK)
  • Talisman Energy (NYSE:TLM)
  • Transocean (NYSE:RIG)
  • Noble Corp (NYSE:NE)
  • Rowan (NYSE:RDC)
  • Ensco

Bernstein upgraded each of Chesapeake, Talisman, and Transocean to "outperform" yesterday. Contract drillers Noble, Rowan, and Ensco got less enthusiastic bumps to "market perform." (Meeting them on the way down was ExxonMobil (NYSE:XOM), which was downgraded to the same rating on valuation. Occidental Petroleum (NYSE:OXY) found itself downgraded to "underperform" for the same reason.)

Why?
Why indeed? Basically, Bernstein's thinking tracks my own, as outlined in last month's column: "Big Oil's Next Bull Run." Oil and gas -- and oil & gas stocks -- have taken a tremendous hit as the global economy ground to a halt these past few months. Buying a barrel of crude to help fill up your Hummer will set you back just $40 or so today; crude prices are now 75% less than when oil was at its highs of July 2008.

But buoyed by news out of the Energy Information Administration, which tells us that crude stocks declined by 200,000 barrels last week -- versus Wall Street's expectation of a 3.5-million-barrel rise -- Bernstein predicts a "rebound" in gas prices later this year. Seeing "limited downside to the beta energy names" (meaning energy stocks with high price volatility, or "beta"), Bernstein Research says now is a good time to start loading up in the sector.

"Should be followed?" Is Bernstein just guessing?
Maybe. I know I was just playing a hunch when I wrote "Next Bull Run." But if you decide to play someone else's hunch, you could do a lot worse than by following Bernstein's lead.

According to CAPS, Bernstein ranks as one of Wall Street's best stock pickers. It gets more than 54% of its picks right, outperforms the market by better than three points-per-pick on average, and ranks in the top 10% of investors tracked on CAPS. Suffice it to say, these guys seem to know what they're doing.

And speaking of hunches
Personally, if I were inclined to follow Bernstein's lead, then choosing among its top three picks in the energy sector -- Transocean, Chesapeake, and Talisman, I think I prefer the first two ideas to the last. Here's why:

After running massive free cash flow deficits in each of the last two years, Chesapeake now predicts it will generate positive free cash in each of the next two years. The company's frequent investments in new capital expenditures leave it with ample capacity to profit from an upturn. Transocean looks even better, primarily because in contrast to Chesapeake, it already has free cash flow (it's selling for less than 10 times free cash flow).

Meanwhile, both stocks are expected to grow their profits in the neighborhood of 10% per year over the next five years. If those estimates should prove conservative -- if Bernstein is (and I am) right that energy prices are bound to rebound in the next few years -- the stocks could be even cheaper.

Fool contributor Rich Smith does not own shares of any company named above. Chesapeake Energy is a Motley Fool Inside Value pick.

You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 569 out of more than 125,000 members. The Fool has a disclosure policy.