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 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 worst and sorriest, too.

And speaking of the best ...
Citi's at it again. Just a little over three months after it downgraded the oil-refining sector en masse in June, megabank Citigroup did an about-face this morning when it upgraded both Valero (NYSE:VLO) and Sunoco (NYSE:SUN) from "hold" to "buy." Strangely, Citi made its call at the same time as fellow analyst UBS was lowering price targets in the sector, citing weak fuel demand, a slowing U.S. economy, and margin-squishing crude oil prices.

While not disputing the above, Citi thinks that Valero's and Sunoco's involvement in blending ethanol with gasoline will give these companies a boost in profits. Ethanol is now selling cheaper than gasoline, thanks to increased supplies and generous subsidies, which Citi thinks the two refiners can use to add to their profits in 2008. But is Citi right?

Let's go to the tape
Judging from its recent record, I'd be wary of betting against Citigroup on this one. During the period in which Citi was bearish on Valero and Tesoro this summer (at the time, it was only neutral on Sunoco), it beat the market with both sell recommendations. Counting from the June 27 downgrades through Aug. 10, when Citi raised the stocks back to "hold," CAPS has Citi outperforming the S&P 500 by five points on Valero, and 14 points on Tesoro. Nice.

Now, I'm ordinarily leery of analysts who upgrade entire industry sectors in one fell swoop with little regard for the differences between companies. But I have to admit, Citigroup does a pretty good job of this. Take, for example, its record in the housing sector, which got a similar broad-brush upgrade last week:

Citi Says:

CAPS Says:

Citi's Pick Beating S&P by:

Lennar (NYSE:LEN)

Outperform

*

5 points

Pulte (NYSE:PHM)

Outperform

*

4 points

Ryland (NYSE:RYL)

Outperform

*

12 points

Centex (NYSE:CTX)

Outperform

*

1 points

D.R. Horton (NYSE:DHI)

Outperform

*

8 points

Combine Citigroup's record with the tempting valuations of the stocks being upgraded today (Valero at seven times trailing earnings, Sunoco at eight, and both companies expected to grow at a double-digit clip over the next five years), and I suspect today's upgrades are going to work out very well indeed for Citigroup.

And for the investors who listen to it.

Speaking of refiners, you may not know this, but once upon a time, a Motley Fool newsletter entitled "Motley Fool Select" recommended Valero for investment. The time was September 2002, and the stock has risen nearly 10 times in value since then. We've since renamed the newsletter Motley Fool Hidden Gems and made the analyst who recommended Valero one of the service's lead analysts. Find out which energy stocks Valero-sleuth Bill Mann likes today when you sign up for a free, no-strings-attached, 30-day trial.

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. 2,350 out of more than 65,000 participants. The Fool has a disclosure policy.