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 120,000-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 (5 Max):
E-House (China) Holdings (NYSE: EJ)	$7.10	****
Force Protection (Nasdaq: FRPT)	$4.92	***
Rambus (Nasdaq: RMBS)	$13.64	***
Ford (NYSE: F)	$3.04	**
Travelzoo (Nasdaq: TZOO)	$7.35	*

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
Wall Street loves these stocks, but Main Street isn't so sure. CAPS members take a cautious, three-star view of two of Wall Street's darlings -- and it seems we're downright bearish on Ford and Travelzoo. One place where individual investors seem willing to sit down and have a cup of coffee with the pros, though, is E-House.

The bull case for E-House (China) Holdings
Don't let the convoluted name fool you. E-House has a relatively simple business model. It's a real estate agent ... in the country with the most potential property buyers and sellers on the planet.

Sound propitious? wdtomas thinks so, and his August 2008 note keeps the pitch simple: "Real estate in China. 1.3B people need to live somewhere and the foriegn investment will pick up."

Slightly earlier, samr123 said of E-House:

Number one player with an envious list of partners in a country that is new to this sort of thing. They make money from the everyday mom and pop homebuyer all the way up to the government. Temporarily down due to recent government tightening, but will turn around as soon as people realize the importance of owning a home of their own.

And balabanovj agreed about a month later:

[E-House] has been growing revenue and earnings hand over fist. They are self described as being 'asset light,' which means they the cash flow comes from their research, services, and sales. They also have a healthy amount of cash on the books to take advantage of any market downturns, whether it's scooping up competitors or investing in distressed properties. ... When the market rebounds, and the Chinese masses start snapping up properties, [E-House] may well be one of the best growth stories around.

Wall Street sure thinks so. While only a handful of analysts have yet tuned in to E-House, these few expect the company to grow its profits at the sprightly clip of 22% per year over the next five years -- not bad for a stock trading a price-to-earnings ratio of less than 11.

With annual revenues currently shy of $170 million, there seems plenty of room for growth in this story. But what could upset the apple cart? Well, E-House faces experienced, savvy competition in the form of Western real estate specialists such as Jones Lang LaSalle (NYSE: JLL) and CB Richard Ellis (NYSE: CBG).

Not only do the Westerners have more experience in the capitalist real estate game -- they're also on firmer financial footing. In our current "difficult" real estate market, both Jones Lang LaSalle and CB Richard Ellis are still generating significant -- if less than a year ago -- free cash flow from their business. Last we heard from E-House, it hadn't managed that trick. (And like many Chinese companies, E-House reports its free cash flow only at the end of the fiscal year.)

Time to chime in
Still, you have to admit that the P/E ratio looks tempting. And there's no arguing that the growth prospects are enormous. Do you think E-House can remain solvent long enough to capitalize on the opportunity, or should the stock be condemned for failure to bring its free cash flow up to code? 

Head on over to Motley Fool CAPS now, and tell us what you think.

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