Wall Street's Buy List

"Actions speak louder than words." There's more than a grain of truth to that old chestnut, I'll warrant. But why does the media focus so much attention on what Wall Street says about companies? After all, upgrades and downgrades are mere words; what really matters is how the big boys act.

Luckily for Wall Street watchers, the Internet has made it easy to find this out, too. All we need do is read MSN Money's list of which companies the institutions are buying. Of course, "Monkey see, monkey do" may not make for the soundest of investment strategies. Even as we view the professionals' words with skepticism, we might also want to think twice before blindly imitating their actions.

And yet there are times when Wall Street is buying, and the smartest investors on Main Street agree. At Motley Fool CAPS, we track the opinions of 75,000-plus lay and professional analysts, then overweight the most successful raters' opinions, arriving at a "CAPS rating" from one to five stars (five being the best). When opinions on Wall Street and Main Street intersect, that just might be the time to do some buying.

Here, then, is the latest version of Wall Street's Buy List, along with a summary of how CAPS investors view the companies:

Recent Price

CAPS Rating

Millicom International  (NASDAQ:MICC)

$113.45

****

Suntech Power  (NYSE:STP)

$69.42

****

Aeropostale  (NYSE:ARO)

$26.40

***

Answerthink  (NASDAQ:ANSR)

$4.25

*

Genitope  (NASDAQ:GTOP)

$4.50

*

Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent pricing also provided by MSN Money on the same date. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Wall Street's top picks get a lukewarm reception on Main Street this week, with only two receiving above-average four-star ratings from investors, while another two are roundly panned. Which of our two four-star stocks shall we feature today? Readers of Motley Fool Rule Breakers are already more than familiar with solar-power tsar Suntech. That stock has occupied a prized slot in our portfolio for nearly a year and a half now, returning 107% in profits during its tenure. To mix things up a bit, let's go with a less familiar name today, as we examine:

The bull case for Millicom International
Well-known in its native Luxembourg, global telecom provider Millicom is a less-than-familiar name here in the United States. Only 22 out of 229 CAPS players who've rated the stock feel comfortable enough with the company to pen "pitches" about it. Those who have taken the time to explain their thoughts, however, paint us the picture of an attractive play on global growth in cellular phone use:

  • CrimsonMan10 observes that "MICC got taken down an inordinate amount during the subprime crisis, and still hasn't recovered completely. Great time to get in; the company works in countries with low cell phone penetration and little basic telephone infrastructure. There's nothing but upside in a market like that; the 39% insider holding tells you that, and the RoE is another reason to allow yourself to be convinced."
  • wbinv2100 agrees: "The third world will use cellular phones over landlines. You're not going to put up telephone wires as fast as you can cell towers. MICC is leading this trend with a dominate position in Central America."
  • The company has also attracted the interest of the All-Star investors in CAPS. kenhannan praises this: "Great cash up front business, delivering cell phones to underdeveloped areas for an up front payment."

All of those views match my own developing-world experience. In my previous life working in the former Soviet Union, I saw a real bias toward cell phones over landlines in developing nations, and a preference for prepaid telecom services over monthly subscriptions among the low-earning populations in such countries. I'd expect Millicom's prepaid business model in the regions where it operates -- mainly Latin America, Southeast Asia, and Africa -- to mimic the success that firms like VimpelCom (NYSE: VIP  ) and Mobile TeleSystems (NYSE: MBT  ) have enjoyed behind the old Iron Curtain.

That said, the valuation doesn't really excite me here. Trading for 18 times trailing earnings (and burning cash to boot), Millicom looks a bit on the expensive side for what analysts predict will be an 8% grower. If developing-world telecoms are your thing, VimpelCom looks more attractive to me, at a 28 P/E but with 23% projected growth.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about international telecoms -- or even what other CAPS players are saying. We also want to hear your thoughts on these, or any other companies on today's list. If you've got an opinion, we've got a place to voice it.

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


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