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 ...
There's no denying that homebuilding stocks have been down in the dirt. But there may be some joy in Mudville this morning -- for Citigroup has gifted one homebuilder, at least, with a long-awaited upgrade. Citing Lennar's (NYSE:LEN) "0.6x current P/BV" (price-to-book value), and pointing out that this valuation offers a 50% discount to peers such as Centex (NYSE:CTX), Pulte Homes (NYSE:PHM), and D.R. Horton (NYSE:DHI), Citi thinks there's an arbitrage play to be found in Lennar.

Simply put, if Lennar can survive the downturn, Citi thinks its stock should approach the prices on offer for its peers. And although this begs the question -- why doesn't Citi see similar potential for Beazer Homes (NYSE:BZH), which trades at an even deeper discount to book value than does Lennar? -- it does seem to have merit.

The logic behind Lennar
I mean, is Lennar a horrible business? Certainly. It showed an operating loss all last year. It's expected to lose more money this year, and yet more next year -- but you can say the same about pretty much every homebuilder out there. Regardless of the losses, some people think there's still a future for houses. If Pulte is willing to ante up more than 1.2 times book value for Centex, then perhaps someone, some-when, will offer better than 0.6x for Lennar.

It makes little difference whether that someone turns out to be a strategic acquirer like another homebuilder, a savvy private equit-eer, or just Joe and Jane investor bidding the stock up. The stock price rises no matter who's paying for it.

Let's go to the tape
Now, it's important to point out here that Citi has not become bullish on housing in general. While the banker upgraded Home Depot (NYSE:HD) last week (a recommendation currently running a little ahead of the market), it also downgraded Cemex (NYSE:CX) the week before that -- and is so far winning with that pick as well.

That said, the closer you get to the actual homebuilders, the less reliable Citi's record looks. Last time Citi recommended buying Lennar, if you recall, it lost badly to the market. Last time Citi recommended buying Pulte, in contrast, the banker beat the S&P 500's performance. Current picks in the sector are performing similarly -- Citi's buy rec on Centex is down, it's recommendation of D.R. Horton is up.

All of which, incidentally, matches Citi's overall record in the stock market. Over the more than 2.5 years that we've been tracking this banker's performance in CAPS, Citi has managed the astounding feat of underperforming a coin flip -- guessing wrong on its picks more often than not (some 50.35% of the time).

Foolish takeaway
Valuation matters, as investor and former Fool writer Whitney Tilson wrote a few years ago, and I have to say that Citi's logic in saying Lennar is vastly undervalued makes a lot of sense. On a price-to-book value basis, Lennar certainly looks to be trading for a too-low price relative to its peers. That said, when you get right down to it, your guess is as good as theirs.

And probably better.

The Fool owns shares of Cemex, which is both a Stock Advisor recommendation and a Global Gains pick to boot. Home Depot 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. 445 out of more than 130,000 members.The Fool's disclosure policy gives you great value every day.