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

And speaking of the best ...

With a freefalling S&P 500 seemingly set for its third straight weekly decline, investors are beginning to wonder -- is this the beginning of the dreaded double dip? Or could this be as bad as it gets? Are we due for a bounce, and is it perhaps time to get back to buying? 

At least one analyst believes it is, and that now's the time to begin buying banking stocks once more. And the really good news? The analyst who says so is one of the savviest investors on the Street: Standpoint Research. On Monday, Standpoint declared that it's finally time to buy Bank of America (NYSE: BAC). 

Arguing that the stock's "1.15x tangible book" valuation prices Bank of America for a "worst-case scenario," Standpoint sees considerable upside if anything but the worst does happen. And while the analyst acknowledges that there is "still some uncertainty surrounding the stock," and perhaps "institutional selling pressure" should large holders decide to unload shares, it says that from a pure valuation perspective, Bank of America is starting to look attractive. 

I agree. 

Let's go to the tape
Why? Well, first and foremost, because over the years I've found Standpoint's advice to be well-grounded in common sense -- and pretty darn good at beating the market (with a stick). Sixty percent of the time, when Standpoint tells you a stock is going to go up, that's exactly what it winds up doing. (Eventually, at least. In investing, patience is a virtue.)

And while naysayers may point out that Standpoint's record in the banking sector isn't quite as red-hot as elsewhere, on the plus side, at least this analyst managed to keep its banking losses small ... even as it racks up big gains on its winners: 

What's inside the box?
Now, even Standpoint admits that, even two years after America's financial system went to heck in a handbasket, banks like Bank of America continue to face "real estate exposure and other well-known and documented issues." Simply put, no one's quite sure what's "inside the box." But what's the solution then, if you want to own a piece of the banking sector but are afraid of getting burned? 

Bet small, lose small. This may be the best way to approach investing in America's banking sector today. If you don't know precisely how risky a stock is, don't risk too much. It also appears to be the rule Standpoint is following when picking Bank of America, and its 1.15 times tangible book valuation. And yet, if you review the battered banking sector, it's apparent that low multiples to book value and earnings are anything but a rarity: 

Fact is, if low price is to be our determining factor in buying these stocks, the much-maligned Citigroup actually looks like a better buy than Bank of America, while the even more-hated Goldman Sachs Group is nearly as cheap valued on its book, and cheaper on its earnings. So should our takeaway be that all these banks are buys at today's prices? Not just Bank of America? 

Perhaps. Then again, I can't help noticing that while Standpoint tells us we should still be buying Hudson City (at 1.1 times tangible book value, carrying a similar valuation to Bank of America's), it has closed out its endorsement of New York Community (which sells for a whopping 2.4 times tangible book value), while keeping a green thumb up on Bancolombia (at 3.3 times tangible book value). 

Clearly, there's more than just low price driving Standpoint's recommendations here. But you have to start looking for winners somewhere, and a low price seems to me like a good place to start. 

Time to chime in
Bank of America has a good, low price tag on it, but so do many bankers these days. Which of 'em do you prefer? Click over to Motley Fool CAPS now and cast your vote for: 

• Bank of America
• Citigroup
• Goldman Sachs
• JPMorgan
• Wells Fargo