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 29,000 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:

Wall Street vs. Main Street
Wall Street's top picks get another mixed welcome on Main Street this week. Only two stocks on today's list receive above-average marks from individual investors. Perhaps more surprisingly, these aren't "sexy stocks." No nanos, bios, or techs for us this week. Rather, both companies hail from the industrial sector: Sun Hydraulics, which manufactures (surprise!) hydraulic cartridges, and the more ambiguously named Astronics, which makes lighting and power systems used on airplanes.

Of the two, Sun seems by far the more popular, garnering more than four times as many outperform ratings as Astronics (200 in all, out of 203 players who ranked the company). Even better, among CAPS All-Stars, Sun gets 104 outperform ratings to just two underperforms. What's got our smartest investors so pumped over hydraulics? Let's find out.

The bull case for Sun Hydraulics
The Fool's own TMFPhila starts us off with some basic numbers: "32% annualized EPS growth over past 5 years. 20.9% EBIT margin as of 7/2006 (ttm) 2.0% dividend yield ... 17% annual dividend growth rate since 1997. Cash flow positive." Sounds impressive, if a bit dry.

For more color on the business behind these numbers, we turn to blutzed44, who writes:

Basically, anything that's big, moves and needs power uses the products Sun develops ... Sun's competitive advantage comes in the superior design of their products. Sun's products are much smaller than previous designs which most customers find important especially for mobile equipment. Also, Sun retains a strong focus on product quality. ... Additionally, Sun has significant and growing market share in its industry.

And let's close with our daily dose of irony, courtesy of JiminyBillyBob: "Small, boring company. Excess cash. High insider ownership. Dividends. Steady growth. Off the Wall Street radar."

Not anymore, it isn't.

To read more about what has Wall Street and CAPS players raving over Sun, click through to Motley Fool CAPS. There's a whole lot more where this came from.

And hey, after reading all about Sun, if you feel inspired to add your own two cents about the company, we'd love to hear from you. Post away.

Fool contributor Rich Smith does not own shares of any company named above. Openwave Systems is a Rule Breakers newsletter recommendation. The Fool has a five-star disclosure policy.