Wall Street's Wish List

"Actions speak louder than words."

It's an old saying, with more than a grain of truth to it, I'll warrant. So why is it that when the Wall Street firms merely "initiate coverage" or "upgrade" their ratings on a company, that gets all the news coverage? After all, those are only words, when what really matters is how the big boys act. Luckily for Wall Street watchers, finding out which professionals put their money where their corporate mouthpieces are has become relatively easy in this Internet age of ours. All we have to do is read MSN Money's list of which companies the Street is most actively buying.

But once we've done that, what next? After all, "Monkey see, monkey do" may not make for the soundest of investment strategies. That's where Motley Fool CAPS can help. The Fool's newest venture into the realm of collective intelligence collects ratings from more than 23,000 lay and professional analysts, then overweights the most successful raters' opinions to come up with a "CAPS rating" from one to five stars (five being the best). If Wall Street's buying and the smartest investors in Fooldom say they're right to do so, that should get your attention.

Let's meet today's list of contenders:

Chickens and eggs
Another well-worn saw asks: Which came first, the chicken or the egg? As you've noticed by now, one characteristic that each of these stocks has in common is that they've experienced dramatic price increases over the past 30 days. But are the Wall Streeters buying because the stocks have gone up -- playing the momentum game -- or is their heavy buying causing the prices to spike? It could even be a combination of the two, a vicious circle of some buyers pushing the price up, and others hopping aboard the bandwagon and enjoying the ride.

Ready to fly?
Much like last week, CAPS players beg to differ with Wall Street's latest wish list. Of the six stocks listed, more than half get tagged with subpar star ratings. But in two instances, our investors think the Street's right on the money. Today we'll examine Nasdaq newcomer Harbin Electric, a Chinese manufacturer of whiz-bang electromagnetic "linear motors" intended to operate conveyor belts, escalators, and similar transport systems. Here's what CAPS players are saying about the firm:

• lybargerlaw introduces us to the company: "[Harbin] has patented [a] revolutionary new type of electric motor: linear, with greatly reduced number of parts, much lower cost per unit of electricity generated and almost unlimited potential for use in all kinds of industrial settings. Co. has agreement with Chinese testing company to develop this new motor to run commuter train."

But what about the valuation? Is it a buy?

• CAPS all-star manucastle thinks so. A shareholder of the stock, manucastle points out that it sports a reasonable P/E of 14.1 (low for its industry), yet earns returns on capital, assets, and equity far in excess of the norm -- triple digits all. These numbers, says manucastle, make Harbin: "VERY undervalued in my book!"
• Indeed, all nine All-Stars who have rated Harbin call it an outperformer. Backing up manucastle's analysis, fellow all-star wisuperman observes that Harbin: "Seems like a very cheap company even with conservative growth estimate of 15%. Its linear motor is in a sweet spot; there is a good chance that it will be used in trains or light rails by the Chinese government. Now it's in Nasdaq; expect it to gain exposure. Share price should appreciate."

Electromagnetic motors? Sounds like a pretty interesting technology to me. And it's not every day you find a company offering a new technology -- and making a profit on it to boot. But what do you think? If you know the company, or the technology, or are intrigued enough to find out more on both, then drop by CAPS and tell us what you think. Working together, we'll beat the Street yet.

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 ranked 34 out of nearly 23,000 raters. The Fool has a disclosure policy.