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 85,000-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 seems less than impressed with Wall Street's buy list this week, giving low marks to two of the firms, and just an average rating to two more. The sole exception: American Railcar Industries, which rates an above-average four stars on CAPS. I suspect you can guess what business this one is in, but let's see if our players can tell us anything more about it.

The bull case for American Railcar Industries

• PowerBanker1000 describes American Railcar as a "pure play in the manufacturing of rail cars and rail tankers. Since there are only so many trains and rails, you will need more cars to meet the demand of shipping. Increases [in] corn, coal and renewable fuels are driving the demand for rail transportation higher."
• CAPS All-Star texaslowlife tells us: "Railroads= 3x the fuel efficiency of trucking. U.S. last nation in the world to gobble so much oil with trucking. Railroads must expand if we want to import less oil. Surely some politician will eventually see this. ... If the Railroad industry expands the way [Buffett] is predicting they will need more cars. ARII isn't the only player in this business, but [there] aren't many." (FreightCar America (Nasdaq: RAIL) and Trinity Industries (NYSE: TRN) are two others.)
• Continuing the theme, pstrifler predicts: "As gas continues to become scarcer on a global scale, rail traffic will increase, emerging as the low-cost way to deliver goods to the marketplace. This is a pure 'rail' play following all the recent train company interest/buying."

I feel like I'm having a real "kumbayah" moment here, folks. Because as a matter of fact, I agree with everybody today. With the three investors quoted above. With Wall Street. With everybody. The numbers I see at American Railcar -- a 14 P/E and 30% projected long-term profits growth -- certainly suggest an undervalued stock. And the company's position at one end of the railroad looks tailor-made to anchor a portfolio that already includes, say, Motley Fool Hidden Gems pick and regional railroad operator Genesee & Wyoming (NYSE: GWR).

And while I'm not super-thrilled to see that American Railcar generates almost no free cash flow, I note that it's doing a fine job creating operating cash flow, and that much of the capital expenditures that are currently depressing free cash flow appear to be of the "expansion capex" variety. Back that expense out, and I suspect you'd find American Railcar's cash profits chugging along right nicely.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about American Railcar Industries -- or even what other CAPS players are saying. We really want to hear your thoughts. Is this investment horse-and-buggy thinking, or an iron horse bearing wagonloads of profit? Click on over to Motley Fool CAPS and tell us what you think.

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