Wall Street's Buy List

Actions speak louder than words, as the old saying goes. So why does the media focus so much attention on what Wall Street says about companies, instead of what it does with them?

Luckily for Wall Street watchers, the Internet brings us MSN Money's list of which companies the institutions are buying. True, we should be as skeptical of Wall Street's actions as we are of its words. But when the 79,000-plus lay and professional investors on Motley Fool CAPS agree with Wall Street's opinions, it just might be time for some buying.

Here's the latest edition of Wall Street's Wish List, enhanced with CAPS investors' opinions of the companies involved:

	Currently Fetching	CAPS Rating
AXT  (Nasdaq: AXTI)	$6.17	*****
LDK Solar  (NYSE: LDK)	$48.88	***
Rick's Cabaret  (Nasdaq: RICK)	$28.24	***
James River Coal	$11.00	***
China BAK Battery (Nasdaq: CBAK)	$5.87	***

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

Wall Street vs. Main Street
Main Street looked at Wall Street's favorite stocks this week, and gave a gigantic shrug -- with one exception. Most of the stocks on today's list get just a so-so three-star rating on CAPS, but Main Street investors believe at least one of these companies deserves a second glance: AXT. What earns this semiconductor components maker a closer look?

The bull case for AXT
Fourteen months and 22 points of S&P-outperformance ago, BLAISEMD predicted that "Increasing demand for [gallium arsenide] and Germanium in handsets and Solar willl drive this stock."

Meanwhile, EPS100Momentum quotes a recent Seeking Alpha article at length in explaining why AXT is a buy:

Institutional investment capital is rapidly moving into solar technology companies, specifically those that utilize compound semiconductor materials rather than silicon for their arrays. Most notably, First Solar (Nasdaq: FSLR) and, very recently, Emcore (Nasdaq: EMKR) have seen rapid price appreciation. In particular, EMKR recently announced a large contract to provide Canada with solar arrays made with a material which contains gallium arsenide GaAs and germanium Ge.

The article goes on from there, discussing rising metal prices and the need for those metals in the solar industry.  

shatch24 adds that: "Based on AXTI's partnerships, they are in an excellent position to grow with the growing use of their specialty compounds." AXT's "partners" -- meaning, I presume, customers -- include such names both big (Motorola (NYSE: MOT)) and small (Bookham).

The merits of its business aside, whether this stock deserves a spot in your portfolio probably depends on your preferred flavor of profits. If GAAP suits you fine, AXT appears fairly priced, with a forward (2008) P/E ratio of 27, and its 27% projected annual profit growth over the next five years. On the other hand, more conservative investors may grouse that AXT has generated positive free cash flow in only one year out of the past 12. (Since I prefer to see my profits in cash, I'm staking out the conservative camp on this one.)

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about AXT -- or even what other CAPS players are saying. We also want to hear your thoughts. Is AXT about to turn the corner on cash profitability, after more than a decade of waiting, or is it time to give up? Click on over to Motley Fool CAPS and tell us what you think.