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 96,000-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 takes one look at Wall Street's fave five this week and wonders aloud: "What are you people thinking?" With just a single exception, every stock on Wall Street's buy list gets roundly panned by the CAPS community. And who might that lucky exception be?

Well, knock me over with a feather -- it's a company tied to the booming energy sector: CE Franklin, a subsidiary of Smith International (NYSE: SII) (which has its own four stars on CAPS). CE Franklin's stock in trade is supplying, testing, servicing, and repairing pipes, valves, flanges, fittings, production equipment, tubular products, and other general oilfield supplies to the Canadian oil and gas industry. Let's find out why CAPS players think this is a good business to be in.

The bull case for CE Franklin:

• With local oil producers like Suncor (NYSE: SU), Imperial Oil, and Petro-Canada (NYSE: PCZ) going full bore into developing Canadian oil wealth, CAPS All-Star MJKpayday expects CE Franklin to profit from being: "to the Canadian natural resource industry as Levis was to western gold miners. I hear the counter argument, we're at the peak of a cyclical industry, but on the flip side CFK is 60% off all time highs, trades at book values, no debt and a 7 P/E ratio." (Note that MJKpayday wrote this three months ago.)
  
• Fellow All-Star SmokeyJoeSmokin agrees, writing in September 2006 that CE Franklin is an: "Undiscovered oil play in the service sector. I like these guys being in Canada. Going forward I think Canada's oil industry will continue to boom. I think the U.S. will rely more and more on Canada to provide us energy. This bodes well for CFK."
  
• On a similar note, wackjob69 asked back in May: "The only question I have is will this company go unnoticed? ... Lots of oil sands up in Canada eh?

Indeed there are, wackjob69. And indeed CE Franklin is -- still unnoticed, I mean -- or so it seems. According to Capital IQ, only two analysts follow the company on Wall Street, and Yahoo! Finance only knows of a single analyst on CE Franklin's trail. Yet despite the lack of on-the-record attention, someone up there is interested in CE Franklin, or else the stock would not be making this list of Wall Street faves.

Personally, I'm not too enthusiastic about the shares, though. While the single-digit forward P/E is certainly attractive, as are the lack of long-term debt and the minimal analyst attention, CE Franklin does have a significant downside for me: the fact that it generates minimal free cash flow, and that this has lagged its reported net income for years.

Time to chime in
However, the aim of this column isn't just to tell you what I think about CE Franklin -- or even what other CAPS players are saying. We really want to hear your thoughts. Does the free cash trickle worry you, or can you overlook this minor fault given the obvious advantages of servicing the Canadian oil sands companies? Click over to Motley Fool CAPS and tell us what you think.

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