Wall Street's Buy List

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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 135,000-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)
Kohlberg Capital Corp (Nasdaq: KCAP)	$6.37	*****
Savient Pharma (Nasdaq: SVNT)	$13.37	**
Tenneco  (NYSE: TEN)	$9.05	**
La-Z-Boy  (NYSE: LZB)	$4.96	*
Dollar Thrifty Automotive (NYSE: DTG)	$13.98	*

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 and CAPS ratings from Motley Fool CAPS.

Wall Street is buying these stocks just as fast as catch can, but down here on Main Street, Fools are far from impressed. I mean, car rentals in a recession? (Who's going on the business trips? Who's taking the vacations?) Furniture retailing in a busted housing market? I'm all for contrarian investing ideas, but some of these seem horribly ill-timed.

And then there's Kohlberg Capital.

The bull case for Kohlberg Capital
CAPS member NetscribeFinancl introduced us to this five-star business development shop back in March of 2007:

Kohlberg Capital is an internally managed, closed-end investment company ... [investing in] senior secured term loans, mezzanine debt and selected equity investments in privately-held middle market companies. ... In December 2006, it completed an IPO and used the net proceeds of the offering to acquire a portfolio of approximately $185 million in aggregate principal amount of senior secured loans.

Luftwasche chimed in at the end of that year, calling it an: "Interesting [business development corporation] with built in CDO platform. Long term growth from portfolio lending, and CLO management fee's. Basicly a spinout of Kohlberg & Co's debt crew."

Moving forward toward today, oldtimer52534 still likes Kohlberg Capital in its own right, writing just a couple of weeks ago, "The dividend is a good eye catcher but the possibility of doubling the price makes the gamble worthwhile."

Which is an admittedly enigmatic statement. You may wonder what exactly oldtimer52534 is talking about here -- but it's pretty simple really. Kohlberg Capital has been reducing its dividend, but even so this stock has a forward yield of 15%. The "gamble" referred to is the risk that Kohlberg Capital is going to have to continue to cut its dividend.

That's the big risk here. But what about the reward -- the "possibility of doubling the price" bit? I won't attempt to read oldtimer52534's mind on the specifics of how much upside he sees in Kohlberg Capital, but I will hazard a few comparisons that may help you come to your own conclusions. Right now, Kohlberg Capital appears to possess $11.53 per share in tangible book value -- or about 80% more than is presently reflected in the stock's price.

Sounds like a deal to me -- but beware. Similar business development companies such as American Capital (Nasdaq: ACAS) and Apollo Investment (Nasdaq: AINV) are also selling for steep discounts to tangible book value. By such "tangible book value is what the stock should sell for" reasoning, American Capital should fetch $12.32 a share, and Apollo $9.82.

(Hint: They don't.)

Time to chime in
And so it would appear that an investment in Kohlberg Capital actually involves two gambles. First, the risk that the dividend will shrink some more. Second, the danger that no matter how undervalued the stock appears to be, it may be quite some time before that value is realized (if ever).

But hey, investing wouldn't be half so fun if there wasn't at least some element of risk, right? Our job is to determine whether the reward justifies it.

So what do you think, Fool? Is Kohlberg Capital worth it -- or not? Head on over to CAPS to let us know.