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 its worst and sorriest, too.

And speaking of the best ...
In a first for this column, we'll be looking today at one of those not-as-rare-as-you-might-think situations -- an analyst downgrading an entire country's economy in one fell swoop. Earlier this morning, international megabank Citigroup did just that for the nation of Turkey. Citing a range of factors, from political tensions rising within the military and the ruling AK party, to high interest rates and bond yields, to a "vulnerable" Turkish lira, Citigroup opined that Turkey's equity market looks likely to be "constrained" this year. Result: Citigroup did a 180 on its previous overweight rating, and marked the entire nation down to underweight.

But is Citigroup right? Or is it overreacting to Turkey's usual air of bedlam -- which plays well with tourists haggling over water pipes in the Grand Bazaar, but less so with staid Wall Street types, shuddering in horror at their Bloomberg terminals. For clues to the bankers' insight, we turn once again to its record on Motley Fool CAPS.

There we see that while not exactly the world's best stock picker, Citigroup is also far from the worst. In fact, with a CAPS rating of 86.42, Citigroup earns an All-Star rating by virtue of its position in the top quintile of our lay and professional investors. On the other hand, the firm's record of making correct calls is, well, a bit less encouraging. I know this sounds harsh, but its sub-50% accuracy rating means you're statistically better off flipping a coin for your investment decisions, than paying Citigroup to make them for you.

In illustration of which, let's look at a pair of international calls that Citi made right, and a pair where it went badly wrong:

Foolish takeaway
What does all this mean to you, the individual investor (aside from: "Note to self: When withdrawing cash from Citigroup account, get it in quarters, and flip one for next investment idea")? Basically, if you're an individual U.S. investor, it means one of two things:

• Beware possible turbulence in the shares of the sole Turkish company with a U.S.-listed American Depository Receipt, Turkcell Iletisim Hizmetleri (NYSE:TKC), and the sole U.S.-listed closed-end mutual fund investing in the country (at least that I've been able to locate), Morgan Stanley's (NYSE:MS) Turkish Investment Fund (NYSE:TKF).
• Otherwise, probably not much.

If you fall into the first category of investors who've managed to find one of the two elusive entrees into the Turkish market, then first, congrats. After a dismal 2006, in which Turkey slipped into the "top" 10 worst performing national markets (according to Motley Fool Global Gains), the country has turned itself around so far in 2007. Even after the 4% dip in prices on Istanbul's benchmark IMKB-100 index yesterday, the market remains up 15% for the year.

If you're in search of advice on how to play the Turkish turmoil, then we've got three ideas for you. First two: We're tracking each of Turkcell and Turkish Investment Fund on CAPS. So with the click of a mouse, you can tap the knowledge of the investors with the best records on each of these companies:

• Turkcell
• TIF

Just don't be surprised when you see that the best predictors of "Turkish delight" aren't investment bankers at all, but ordinary investors like you and me.

And if you're looking for even more detailed analysis of the Turkish situation, and/or Turkcell in particular, don't forget to claim your free trial of Motley Fool Global Gains, where lead analyst Bill Mann has recommended Turkcell, and regularly updates our members on its progress. Just like playing CAPS, the free trial is absolutely free. Kind of by definition, you know.

Suntech Power and Baidu.com are Rule Breakers recommendations. 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 298th out of more than 28,000 raters.