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 150,000-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.

Profit goeth before the fall
Up until just a couple of weeks ago, Wall Street was riding high. The latter half of 2009 treated investors to beaucoup profits, and early January looked to continue the trend -- but no more.

As January wound down, stock markets took a tumble, and as you can see up above, investor confidence is starting to go down with 'em. Hardly any of the companies on Wall Street's shopping list today receive bullish marks from Main Street investors. The exception being …

VASCO Data Security 
CAPS member choicelaw thinks this provider of banking security software is "Well positioned" and boasts "excellent foundamentals." (Which I'm presuming is the British spelling for "fundamentals"?)

burnssage agrees, arguing that: "Cybersecurity is still a growing market with plenty of room for growth. Although VASCO is down now, as the economy recovers they are postured for a comeback."

And in fact, they may already be well on their way. As hateninja recently related: "Never heard of Vasco until my sister came back from Europe years ago where this security was standard fare for banks. Soon, it will be in the US as well." (Actually, in addition to having a large European client base including the likes of HSBC (NYSE:HBC) and ING (NYSE:ING), VASCO already counts Wells Fargo (NYSE:WFC) among its customers here in the States.)

Promise and peril
That said, just because the idea of VASCO seems to be catching on, doesn't mean the stock is ripe to buy today. Selling for 15 times free cash flow, and nearly 33 times earnings, optimism about this stock already looks to be sky high. Whether this optimism will be rewarded depends in large part on whether VASCO can deliver on its promise when it reports Q4 earnings later this month.

Personally, when I look at the stock, it's not so much the price that worries me as the growth prospects. Analysts are still projecting only 10% annualized five-year growth for VASCO, which to my mind is a bit too slow to justify the multiples we're seeing on this stock.

That said, when you recall that Wall Street's investment bankers are banks ... I mean, if Wall Streeters are the ones buying this stock, well, who knows the health of the banking sector, and trends in bank spending, better than them?

Foolish takeaway
When you get right down to it, there are really two ways to look at VASCO -- and the bankers who are buying it. On the one hand, these guys have the best vantage for viewing banking industry trends, and they think highly enough of VASCO's products that they're buying the stock today. This, to me, looks bullish in the extreme.

On the other hand, "these guys have the best vantage for viewing banking industry trends" ... and they're telling us VASCO is only going to grow 10% per year from here on out. This, to me, looks just as extremely bearish.

Personally, the mixed signals Wall Street's sending are enough to keep me out of the stock till the growth picture firms up a bit. But that doesn't mean you should avoid it. If you believe Wall Street's overly conservative on the growth prospects, here's your chance to tell us why.