Wall Street's Buy List

"Actions speak louder than words." There's more than a grain of truth to the 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, but what really matters is how the big boys act.

Luckily for Wall Street watchers, the Internet has made it easy to find this out. 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 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" of 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:

Wall Street vs. Main Street
Wall Street's top picks get no respect on Main Street. Nearly every stock on its shopping list this week is roundly panned on CAPS. Only one, electronic-components maker TriQuint Semi, gets a grudging three-star rating.

I have to admit that I'm inclined to agree with the CAPS consensus on this one. Analysts don't expect TriQuint to grow its profits faster than 10% per year over the next five years -- considerably slower than the average for semiconductor firms. Yet the stock trades for 54 times trailing earnings, and 35 times trailing free cash flow. If you ask me, that's a bit rich.

For a contrary view, though, let's see what TriQuint's backers have to say about the company, as we examine ...

The bull case for TriQuint Semiconductor

• stocksupandaway calls TriQuint a "Niche semi-conductor with high China access."
• partner34 says: "Tqnt is pursuing a high value [integration] module strategy. Integration of SAW/BAW, PAs and their high performing miniature duplexer are way ahead of the [competition]. All major vendors will [lose] out, if they don't [use] tqnt integrated module; gone are the days for the handsets employing unique wireless components."
• scvegas predicts TriQuint "will ride the [Apple (NASDAQ:AAPL)] train. They are thought to make the PA for the next generation of Iphones. Plus diversity and a strong management model look to be bright. "

Now mind you, I don't know a whole lot about this company myself. In demonstration of which, I freely admit I had to do some Googling to confirm that "SAW/BAW" refers to surface acoustic wave and bulk acoustic wave components used in cell phones. And that a "PA" is a power amplifier. I also learned that the blogosphere is rife with the Apple rumors that scvegas cites as underlying his investment thesis. (Yet the company itself said not one word about Apple in its most recent earnings report, nor in its follow-up conference call.)

Regardless, I have to assume that the analysts who follow this stock have heard the same rumors, and factored the rumors' accuracy (or lack thereof) into their predicted growth rate. In the end, it's the valuation on the stock -- again, 54 times GAAP profits, 35 times cash profits, but only a 10% growth rate, that persuades me to stay away from this TriQuint.

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