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 125,000-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 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 may think these five stocks are the bee's knees, but down here on Main Street, we're wondering what all the buzz is about. Fact is, CAPS members give four of these five their lowest possible rating -- the CAPS booby prize of a single, lonely star.

Only in one instance are Fools willing to bet alongside Wall Street: on Macquarie Infrastructure.

The bull case for Macquarie Infrastructure
If you've never heard of Macquarie, well, it's not exactly the kind of business that attracts headline writers in our financial press. Macquarie's stock in trade is, as it says: "providing basic, everyday services, to customers in the United States. Its businesses consist of an airport services business, a 50% indirect interest in a bulk liquid storage terminal business, a gas production and distribution business, a district energy business, and an airport parking business." Sexy!

• OK, not sexy. But ArmyStockTrader asked us in April 2007 to bear in mind that "Infrastructure is the foundation for everything else. The world revolves around infrastructure. Therefore, its a rock solid investment." 
• CAPS All-Star drjohn432 agreed last June, writing: "Infrastructure is the key to the future. they own it and rent it to us. Short of government takeover, their niche is safe. Dividends are the story here."
• As does dogfish54, who explained a couple of months later: "[Macquarie] is a trust, which is why the dividends are so high. They are part of Macquarie Group of Australia, a VERY VERY successful business which owns a lot of big infrastructure in Australia. The parent has a lot of experience and success in infrastructure and I think this will be a very good stock over the long term. Do your research on this one and I think you will find this to be a good long term hold, especially with the big dividends."

Taking dogfish54's point to heart, I did some looking into the company. But I've got to tell you, folks -- what I found has me disagreeing with Wall Street, and with the CAPS majority as well. For one thing, the dividend that so attracted our pitchers last year (most of the above pitches are more than a few months old) got slashed by more than two-thirds in November. While the stock's still yielding 14.6% -- hardly peanuts -- if it had been paying out dividends at its previous rate, the yield would be an unbelievable, and probably unsustainable, 55%.

For another thing, I don't see how Macquarie can avoid cutting its dividend even further. Heck, I can't even figure out how it's managing to remain solvent! The company already has an interest coverage ratio of less than 1.0, meaning that every year, it makes less operating income than it owes as interest on its debts. What's more, from the data I have, Macquarie has never made enough money to service its debt.

Granted, Macquarie isn't the only company in such straits. Ford (NYSE:F) and GM (NYSE:GM), for example, are both corporate poster children for this dilemma -- but you don't see CAPS members giving either of them four-star ratings. Why investors are willing to give Macquarie the benefit of the doubt when it's similarly situated is quite beyond my ken.

Time to chime in
Of course, it's entirely possible that I'm misreading this story. Maybe there's a glaring error in my analysis and I'm just plain blind to it. If that's the case, though, I'd welcome your pointing it out for me. Come on over to Motley Fool CAPS and tell us why this story isn't as bad as it looks. 

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