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 115,000-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:

Stock	Recent Price	CAPS Rating (out of 5):
AECOM Technology (NYSE: ACM  )	$24.65	****
Granite Construction (NYSE: GVA  )	$29.87	****
Goldcorp  (NYSE: GG  )	$24.22	***
Luminex  (Nasdaq: LMNX  )	$20.35	***
Force Protection  (Nasdaq: FRPT  )	$3.28	***

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. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Main Street takes one look at Wall Street's fave five this week and ... shrugs. For the most part, our CAPS members could take 'em or leave 'em, since they give three of the five companies only middling three-star ratings. The exception that proves the rule, however, might come as a bit of a surprise -- to anyone who's noticed that we're in a recession, at least.

AECOM "Technology" isn't really a "tech" company at all. Rather, it's a provider of architectural, engineering, and construction management services, and it helps Big Government build Big Infrastructure projects like bridges, highways, and airports. But with tax revenues threatened by a shrinking tax base (as home values plummet and GDP runs downhill), it seems counterintuitive that a company dependent on taxpayer-funded projects would thrive. So what has CAPS members feeling optimistic about AECOM? Let's find out as we review ...

The bull case for AECOM Technology

• AECOM is not a U.S.-only play on infrastructure spending. According to bcven (writing in April), AECOM is an "excellent infrastructure, mining, town development play [that should profit as] the economies of BRIC grows."
• What do Brazil, Russia, India, and China have to do with a U.S. engineering shop? As rliriano pointed out in May, AECOM is a "Global Infrastructure play" as well as a bet on "constructing more roads and bridges within the U.S." AECOM boasts "more than $4.2 billion in annual revenue [and] has more than 35,000 employees in some 60 countries in virtually every market from energy to transportation, yet that geographic and operational diversity also make it hard to pin down."
• And even less-developed nations than those of the BRIC may offer profit potential to AECOM investors. CAPS member peaksfreak points out that "[t]hese guys are big in water and wastewater engineering -- aging infrastructure in small and large communities worldwide require the services ACM provides, not to mention emerging nation needs for water."

Fact is, AECOM derives nearly one-third of its income from overseas operations, where it competes with the likes of Fluor (NYSE: FLR  ) and Jacobs Engineering (NYSE: JEC  ) . Yet one of the first things you'll notice about AECOM from a valuation perspective is that it carries a price-to-earnings ratio nearly twice as high as either of these heavyweights. So is AECOM worth the price?

Maybe yes, maybe no. Even though AECOM carries a lofty 17 P/E, it's growing quickly enough to justify that valuation. According to Wall Street's finest, the company will grow earnings at about 18% per year over the next five years, enough to put the company's PEG at just below 1.0 -- an apparent bargain.

On the other hand, free cash flow appears to be lagging. AECOM has not yet reported its full-year free cash flow for fiscal 2008, but preliminary numbers suggest that it fell short of $100 million. The Wall Street Wise Men don't seem to have caught on to this fact just yet, but if my guess is correct, it puts the company's price-to-free cash flow ratio at a loftier 25. 

That seems a mite pricey. So I'm going to disagree with the professionals and suggest that Fools wait for AECOM's stock price to come down a bit before buying in.

Time to chime in
Of course, that's just my opinion. Head on over to Motley Fool CAPS, and tell us yours.

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