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:

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

Wall Street vs. Main Street
Our list forms a nearly perfect inverted pyramid this week, with Main Street sentiment running almost the full range from one to five stars on our five Wall Street picks. At the top of the heap is a company I've seen pop up in screens repeatedly over the past few weeks, but one that I've never quite had a good enough reason to examine closely ... until today.

In its own words, Powerwave "designs, manufactures and markets antennas, boosters, combiners, filters, repeaters, multi-carrier RF power amplifiers and tower-mounted amplifiers and advanced coverage solutions, all for use in cellular, PCS, 3G and WiMAX networks throughout the world." 

Why do investors (and Wall Street) love it? We'll let them speak for themselves:

The bull case for Powerwave Technologies
CAPS All-Star BigGooseUp highlighted the company's potential back in 2006: "[T]hey still are a leader in [supplying] the tower based equipment for cell phones, specially for the 3G phones with all of the adv. features, banking on a buildout in china prior to 08 olympics & renewal of cingular expansion." Sadly, the stock proceeded to plunge, costing BigGooseUp significant market underperformance on this pick.

But every plunge has the potential to reveal an opportunity, and fellow All-Star NeroSagetrade spied a chance to rack up nearly 60 points' worth of market outperformance back in March, arguing: 

Powerwave Technologies may be at a respectable valuation for the first time since it became listed over a decade ago. [Powerwave] is trading below both its book and sales valuation with an expected profit of 27 cents in 2009 for a forward price to earnings of 9. The thing that really stands out about [Powerwave], other than its erratic earnings reports, is the fact that nearly 1/5th of their business comes from Nokia (NYSE:NOK), and Nokia has been performing more solidly than any of the other handset providers recently. As long as Nokia and Siemens (NYSE:SI) continue to perform well I don't see much downside from here.

Many of NeroSagetrade's numbers are now out of date after Powerwave's recent run-up. So what's the situation look like today? Our third All-Star investor, LEGMAKER, updates us thusly: "This last earnings quarter was quite good, and it looks like the company has turned things around as they have moved fabrication to one location in China. Look for increased earnings on growth and cost containment."

Each of these three investors ranks in the top 20% of our CAPS players, and all praise Powerwave. So why am I not convinced?

It's simple, really: The valuation just doesn't attract me. From a trailing P/E perspective ... well, the stock doesn't have one, because it's unprofitable. And while it's true that analysts expect the firm to turn a profit this year, the 2009 forward P/E ratio of 13 looks pricey relative to expectations of just 10% annual growth going forward.

Top it all off with Powerwave's four straight years of burning cash, and I just can't get behind this stock. To me, Powerwave looks like a wipeout.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Powerwave, 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. Everyone from novice to professional is welcome. Admission's free.