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

And speaking of the best ...
Pity Citigroup (NYSE:C). It was right, but that didn't matter.

On Wednesday, the New York megabanker clambered way out on a limb, then drop-kicked Aflac (NYSE:AFL) straight off its buy list. Taking credit for its keen advice to buy the stock back in January (a recommendation that outperformed the market by 31 percentage points), Citi now says that Aflac's wings are due for clipping. Citi warns that the stock will grow at only half of its historic 15% pace over the next three years.

To hear Citi tell it, this duck is about to fly into a whole hurricane of headwinds:

  • Weak sale trends in the U.S. and Japan
  • Increased losses on its investments
  • Declining risk-based capital ratios

But what are the chances that Citi's right?

Let's go to the tape
Aflac shareholders may be comforted to hear that the chance of this is ... low. Consider Citi's record in the insurance industry to date, as measured by CAPS:


Citi Says:

CAPS Says (out of 5):

Citi's Picks Beating (Lagging) S&P By:

Prudential Financial (NYSE:PRU)



98 points

Travelers  (NYSE:TRV)



15 points

Marsh & McLennan  (NYSE:MMC)



(2 points)




(11 points)

American International Group




(72 points)

Oh, sure. Citi scored big with Prudential. Kudos for that. But it blew nearly all its winnings when it made an ill-considered bet on AIG last summer. Over the length and breadth of the industry, Citi has racked up a record of only 42% accuracy on its insurance picks -- and a staggering 340-point aggregate loss to the market for its 36 recommendations in this field.

Ouch, indeed
Adding insult to the injury, no sooner had Citi panned Aflac than the duck quacked back, disappointing investors with earnings below expectations.

Citi may have been right about the "losses on investments" prediction. Aflac took a $104 million charge on its investment in CIT Group (NYSE:CIT), en route to an aggregate quarter-billion dollars in charges on bad investments.

But Citi may have been wrong on everything else. Analysts estimated that Aflac would report $1.14 per share in operating earnings; instead, the company blew those estimates out of the water, with operating earnings of $1.20 per share (excluding investment losses). And Citi's prediction that Aflac's growth will slow to "half of 15%" going forward? Management begs to differ, predicting that it will grow operating earnings 13% -15% this year.

Bait first, then switch
Now, at this point, you're probably expecting me to tell you to ignore Citi's pessimistic prognosis, and go ahead and buy Aflac -- especially considering that Aflac is an official Motley Fool Stock Advisor recommendation. Much of Wall Street seems to buy Aflac's argument, agreeing that the company will maintain an annual growth rate north of 13% over the next five years. All of which makes Citi look awfully lonely in its pessimism.

Lonely, but not necessarily wrong.

After all, Citi's not actually telling you to sell Aflac -- only that you shouldn't buy the company at its current price. In that respect, Citi's right. Pegged for 13.3%, Aflac is not a cheap stock, especially since it now trades for 15 times earnings. Aflac will likely have to maintain its own heady growth pace and prove Wall Street right just to maintain its current valuation.

Sure, the firm's generous 3% dividend yield offers some consolation, and a reason to hold on to the stock if you already own it. But taking into account all the bargains on the stock market these days, should Aflac be the stock to buy?

That idea's for the birds.

Aflac is a Motley Fool Stock Advisor pick. Marsh & McLennan is an Inside Value selection.

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. 883 out of more than 135,000 members.