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 140,000-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)
|
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Gerber Scientific (NYSE: GRB )
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$5.76
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*****
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ATP Oil & Gas (Nasdaq: ATPG )
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$16.75
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****
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KKR Financial
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$4.36
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***
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Huron Consulting (Nasdaq: HURN )
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$19.37
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***
|
|
Delta Petroleum (Nasdaq: DPTR )
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$3.83
|
***
|
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 professionals think these stocks will go far, and for the most part, Main Street investors are willing to give them the benefit of the doubt. Every stock on the list this week receives at least a three-star rating, and Fools are positively enthusiastic about the prospects for ATP and Gerber.
Gerber grabs more stars than ATP, however. Which is why, today, we'll be researching ...
The bull case for Gerber Scientific
At a market cap that just barely reaches $142 million, you probably wouldn't expect Gerber to garner a lot of attention from investors -- and you'd be right. Fact is, only two CAPS members have chimed in with positive reviews of the company so far. Namely:
- OklaBoston, who praises Gerber for delivering a "positive earnings surprise ... Aug. 27, 2009, plus the fact that it ... is not what this site calls a 'water cooler' stock." (i.e., a stock that people like to talk about.) Right now, the three companies heading up that list on CAPS are: Apple (Nasdaq: AAPL ) , Google (Nasdaq: GOOG ) , and Microsoft (Nasdaq: MSFT ) -- sexy techs, every one. Natch.
- So Gerber isn't the most popular kid in class. That's just fine with EclecticRecluse, though, who's happy to grab a bargain while investors overlook the firm's "Extremely Low Price for Sales."
And yes, relative to the higher-profile stocks topping our water cooler list, Gerber does fetch a low multiple to sales. Its ratio of 0.3 is just a fraction of what the cooler kids attract -- investors are paying 3.8 times sales at Microsoft, 4.5 at Apple, and a whopping at 6.7 for Google. Now, considering that Gerber nets only a small fraction of a percent on its sales, you might think that's appropriate. I don't. To the contrary, I think Gerber offers investors a chance to nab a real cash machine at a discount.
Why? Because while GAAP accounting standards only allowed Gerber to report $2.1 million in "net earnings" over the past year, the firm has in fact generated a whole lot more free cash flow than that. In fact, over the last 12 months, Gerber's free cash has outrun its reported "profit" by a factor of 10. Result: The stock currently sells for just 6.4 times the company's $22.1 million in free cash..
Now granted, Gerber also carries a hefty slug of debt on its balance sheet. I'd love to see management divert some of its cash flow to eroding that $61.6 million pile of IOUs. Still, if you ask me, the stock looks every bit the bargain that Wall Street believes it to be.
Time to chime in
But hey, that's just my opinion -- what's yours?
Tell us all about it on Motley Fool CAPS. It's fun, it's free, and it just might make you famous.
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