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 105,000-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:

 

Recent Price

CAPS Rating

(5 max):

VanceInfo Technologies  (NYSE: VIT  )

$13.20

*****

James River Coal  (Nasdaq: JRCC  )

$36.65

***

Enterra Energy Trust (NYSE: ENT  )

$4.36

***

China Architectural Engineering (AMEX: RCH  )

$10.71

**

UTStarcom

$4.97

**

Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance as of the same date. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Main Street seems less than impressed with Wall Street's top picks this week. Investors give two of them a pass (both energy shops, natch), but two more get roundly panned on CAPS. There is, however, one company where Wall Street and Main Street intersect: They both love Chinese IT outsourcer VanceInfo Technologies.

My off-the-cuff thinking is that they may be right to be bullish. After all, India's getting more and more expensive for outsourcing. Logically, capital is going to start moving in search of cheaper markets -- and China is one such market. That said, I'm far from expert on this stock. Let's find out what the people who really know VanceInfo think about it.

The bull case for VanceInfo Technologies

  • CAPS All-Star griderX argues that: "As an (IT) service provider and software development firm located in China they may experience the same type of growth their Indian counterparts ([Infosys (Nasdaq: INFY  ) , Satyam (NYSE: SAY  ) & Cognizant (Nasdaq: CTSH  ) ] to name a few) have [experienced] in the past, going forward if they can compete on the same quality & price level. After all, alot of the Indian outsourcers have been tapping the Asian markets for cheaper talent over the last few years."
  • will2u agrees: "Companies are looking to cut costs and save money. It's not the companies per say, [it's] the executives looking to make a name and a quick profit, pay for performance, [whether] or not the decision is good for the company. …"
  • sunshine9924 adds that, "The outstanding P/E ratio is what got me on this one."

VanceInfo's 18.5 price-to-earnings ratio might not seem like a bargain at first glance, but relative to the 37% annual growth analysts are expecting this company to post, it looks mighty attractive on second glance.

With one caveat: I don't ordinarily like to hang my Foolish jester cap on a company's P/E alone, preferring to "quality check" that number against free cash flow, as tallied up on a company's cash flow statement. This poses a problem with VanceInfo. Simply put: There are no cash flow statements. Both of the company's last two quarterly reports (including the one two quarters back, which gave the rundown for all of fiscal 2007) lacked cash flow statements.

Lacking insight into the company's free cash flow, I'm unable to give this stock an unqualified endorsement. That said, the initial indications look good, and if VanceInfo ever gets around to living up to its name and giving us the info we need, I hope to be able to confirm this stock's "buyability" at some point in the future.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about VanceInfo Technologies -- or even what other CAPS players are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.

Satyam is a recommendation from Stock Advisor. Try 30 days of this market-thumping newsletter service on us.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 1,502 out of more than 105,000 players. The Fool has a disclosure policy.


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