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 60,000 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, then that should get your attention.

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

Wall Street vs. Main Street
Wall Street's hottest picks get only a lukewarm reception on Main Street this week. Just one of Wall Street's fave picks was rated above average, and everyone else was deemed average or below -- or completely below the radar, in Metalink's case. The sole winner in the CAPS popularity race: ocean-going cargo carrier TBS International. With a stock already up 360% over the last year, you might wonder whether Wall Street has already (pardon me) missed the boat on this one. But the bankers are buying nonetheless, apparently anticipating even greater gains.

Out of 131 CAPS All-Star investors surveyed, 127 agree that the good ship TBS has not yet sailed. Let's find out why:

The bull case for TBS International

• ObEgOnG lays out the numbers for us (as of June 2007): "Low 14.2x P/E (trailing)... Even lower 7.19x P/E (forward) ... Undervalued 0.92 PEG and 2.52 P/B ... 62.1% EPS Year-to-Year Growth Prediction ... Conclusion: Great value stock poised for substantial short and long term growth the next 2 years." (Note: The stock is up about 40% since ObEgOnG wrote this pitch, so adjust accordingly.)
  
• majakblue writes: "I like companies with basic services that don't go out of style or become obsolete. They just bought brand new ships." That explains why the firm's free cash flow is negative ($67 million) versus $45 million in GAAP net earnings.
   
• Luckyclover0958 likes the firm for two simple reasons: "Shipping companies are needed in our society. Well managed shipping companies last a very long time."

It's that last point that concerns me, however -- the "well-managed" bit. While I admit that the firm's 21% return on equity is impressive, relative to the rest of the shipping industry, TBS doesn't really look all that great. It sports gross margins 15% below the norm, and a 7% subpar operating margin. Relative to the numbers being posted by a rival like DryShips (Nasdaq: DRYS  ) , for instance (76% gross margin, 39% operating), the disparity looks even more stark. Meanwhile, with a trailing P/E of 20, TBS sells for a premium to the market at large, to the shipping industry in which it operates -- and to DryShips, as well.

Time to chime in
That said, the aim of this column isn't just to tell you what I think about Wall Street's favorite stocks -- or even what our All-Stars are saying. We want to hear what you know about the company. Is there still time to hop this boat, or are investors better off jumping ship? Whichever direction you tack on this question, be sure to make port at CAPS and tell us what you think.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.

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. 608 out of more than 60,000 raters. The Fool has a disclosure policy.