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 84,000-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 Buy List, alongside our investors' opinions of the companies involved:

Wall Street vs. Main Street
Main Street gazed upon Wall Street's favorite stocks this week, and commented: "Sure. Whatever." Basically, investors could take these companies or leave them -- with one exception. The one firm getting an above-average rating on CAPS is Century Aluminum. As its name implies, it's essentially a smaller version of Alcoa (Nasdaq: AA), commanding one-tenth the aluminum giant's market cap while boasting annual turnover just 6% of the larger firm's level.

Why do CAPS players believe that Century merits a price-to-sales ratio roughly 50% greater than that of its rival? Let's find out.

The bull case for Century Aluminum
CAPS All-Star mars220 calls Century an "energy efficient producer of Aluminum -- in an environment and industry where energy costs are at all time high."

"Energy efficient how," you ask? terzen answers: "This aluminum producer has moved a large portion of its facilities to Iceland where enegy is produced by the earth's free steam. This reduces a major cost of producing alumimum making for a nice bottom line."

Another of our All-Star investors, Jro81, argues that relative to larger rivals Alcoa and Alcan (which has since become part of Rio Tinto (NYSE: RTP)), Century looks like a: "Cheap aluminum company .... yes, it's a small cap .... but provides better value [than] AL or AA."

OK, then. So let's quality-check that last statement. Comparing Century to "Alcan" isn't the easiest thing to do, now that Rio Tinto has swallowed Alcan whole. But we can still compare Century to Alcoa.

In doing so, we see right away why Mr. Market is giving the smaller company a bigger P/S ratio in this matchup. Century may be the smaller player, but it smelts much more profit from its revenue than Alcoa does. Century boasts a 16.9% operating profit margin on its sales, as compared to Alcoa's 11.6%. Moreover, Century has historically grown faster than Alcoa, with profits rising at a compound rate of 32% per year over the last five years, to Alcoa's 26.5% pace.

Personally, I'd shy away from Century. But if you're bullish on the commodities boom continuing, and you feel that aluminum will benefit from the boom going forward, I can certainly see why you might follow Wall Street's lead on this one. If you do, you'll certainly be in good company on CAPS.

Time to chime in
Well? Are you bullish on the boom? Don't keep the good news to yourself -- click on over to Motley Fool CAPS and tell us why you like Century Aluminum.

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