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. 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, so too might we 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 77,000-plus lay and professional analysts, then overweight the most successful raters' opinions, arriving at a "CAPS rating" of from one to five stars. 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
Main Street investors feel basically OK about Wall Street's top picks this week, giving the majority of stocks on the list average ratings. One they dislike gets just one star, but in this column, we're looking for the stocks where Wall Street and Main Street sentiment intersect.

That stock would be Mosaic, a workaday producer of fertilizer and animal feed supplements. (Fascinating, I know. But before you pull a jaw muscle yawning, take note: The stock has nearly tripled over the past year, outperforming rivals Potash (NYSE: POT) and Agrium (NYSE: AGU).) Reason enough for us to take a closer look at ...

The bull case for Mosaic

• CAPS player bb7384 observes that: "Higher prices for phosphate and potash raised [Mosaic's] quarterly [per-share profit] more than 175% to .69 a share from just .25 a share last year. Sales are up 56% to $2B."
• Wow. So what is it that's driving Mosaic's sales and profits through the roof? Funky991 explains: "Wheat and corn prices continue to rise, which encourages farmers to plant as much acreage of corn and wheat as possible. They will apply the necessary fertilizer to get the best crop, which benefits Mosaic. Also, with a growing demand for Biofuels and a growing population higher agricultural prices should continue."
• STKLST agrees: "As corn replaces soybean crops (re: ethanol production), nitrogen based fertilizers will be in high demand. Likewise, as China, India, and Russia continue to experience rapid GDP growth, the daily caloric intake of the more affluent worker increases. This translates into the need for more crops and hence more fertilizer. There are few players in North America: primarily Potash (POT), Mosaic (MOS), Agrium (AGU), and Terra Nitrogen. MOS has [beat] estimates 2 quarters in a row and seems to look better technically."

What STKLST did not mention, however, is that before Mosaic beat estimates two quarters in a row, it missed estimates by nearly 69% in the February-ended quarter. So while the bullish thesis on this one sounds good, investor beware: Expectations for Mosaic are high, and another "miss" could hurt this stock badly. At the current price, Mosaic shares sell for 59 times trailing earnings, and 52 times trailing free cash flow.

Time to chime in
To me, those metrics look pretty steep for a stock that analysts don't expect to grow as fast as even 10% per year over the next five years. But I'm a pretty risk-averse Fool. Perhaps you think the analysts are underestimating this fertilizer producer's ability to grow a cash crop. If so, we're all ears. (Get it? Corn? Ears? Is this mike working?) Come on over to CAPS and tell us why.