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 nearly 25,000 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.

And so, let's meet today's list of contenders:

Wall Street vs. Main Street
Wall Street's top picks got a mixed reception from Main Street this week. Half hold ratings above average, half below, and one right in the middle. Because we're looking for companies where these investor boulevards intersect, we focus on the top half: Asta Funding, BioSante, and National Beverage. Of the three, Asta Funding gets the most attention on CAPS, with nearly twice as many investors chiming in on its prospects as on the other two companies combined. Why so much interest in, and enthusiasm for, a small-cap, $600-million debt collector? Well, let's find out.

The bull case for Asta
Over at Motley Fool CAPS, 167 out of 172 of our fellow investors give Asta the thumbs-up, including 73 out of 75 "All-Stars" on record. Here's what these super-investors have to say about Asta:

• SmokeyJoeSmokin says: "I've been a longtime holder of ASFI. It's a good company with good margins. I anticipate that bad credit card debt will actually increase in the coming years, which is bad for the economy, but good for companies like ASFI, since supply of this debt has been tightened over the last few years as more players have entered the arena."
  
• lojet observes that: "This company is making lots of cash. Their 'customers' have a lot harder time declaring bankruptcy than they used to. Management is very disciplined about not paying too much for new accounts and have set up a flexible cost structure."
  
• HardTen gives us the numbers on Asta: "This company has trading at a P/E of 12 and a foward [sic] P/E of 10, profit margin of 46%, Op Margin of 80%, Quartery [sic] rev and EPS growth are 36% and 38%," continuing: "For all those that have refinanced during the past real estate boom into Option ARM mortgages and can not lock in rates due to loan covenants, this company is going to benefit from the defaults and increased dependence on consumer credit card usage and late payments."

Time to chime in
All of that sounds pretty good, but just a couple caveats. Since HardTen's pitch was published, Asta's valuation has become about 10% more expensive on a P/E basis. Granted, its profit margins are up a bit as well, but its latest quarterly revenue growth slowed to 23%. Finally, lojet offers us a note of caution: "The stock price seems to be very volatile so buy on dips." Word to the Foolish.

Caveats aside, what do you think? Is Asta still a buy even after its recent run-up? Click on over to Motley Fool CAPS, and tell us whether you think this bull still has room to run.

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 70th out of more than 25,000 raters.