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 160,000-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.

Jobless recovery? What jobless recovery? Hey, unemployment may have risen last month, but the Dow's still sitting north of 10,000. And just because a fellow loses a job doesn't stop mean he stops aging, or lose his need for health care. Figuring that drug stocks and senior care remain growth industries in any economy, Wall Street's gone on a buying spree -- but CAPS members shudder at the companies the bankers have been buying.

I understand the confusion. I mean, is it really a good idea to buy Millipore, with a 33 P/E and sub-10% growth projections? Or Intermune and Sunrise, neither of which is seems capable of earning a profit? Or Somaxon which struggles to report even revenues? No thanks.

Then again, I've also got my reservations about the one stock on today's list that CAPS investors appear to agree is worth buying ...

Morton's Restaurant Group
When you think about companies likely to do well in a weak economy, names like Walmart (NYSE: WMT) and McDonald's (NYSE: MCD) tend to predominate -- cheap wares and cheap fare for consumers on a tight budget. In contrast, it's unlikely that high-end steakhouses or pricey Italian eateries leap readily to mind. Yet that's precisely what Morton's specializes in.

Reviewing the pitches penned in this company's favor on CAPS, we find plentiful praise for the company's "USDA prime aged steak" and its "best in class" status in the fine dining business (CAPS member NetscribeRstrnts). We see Fools commending the company's ability to "lure the high-rollers, of whom there always seem to be quite a few." (JJHBowers). But what we also find is that not a single CAPS member has had anything interesting to say about Morton's since April 2008.

You read that right. Not a single CAPS pitch has been penned on the company in nearly two years. And yet, an awful lot has changed about Morton's over this time period.

What's the sell-by date on this stock?
For example, in January 2008, KansasFarmBoy made Morton's "Book value ... over nine bucks" a central tenet of his buy-thesis for Morton's. Yet if you review Morton's numbers today, you'll find that that book value has been cut nearly in half, as Morton's now boasts a book value-per-share of just $4.60.

Nor do Morton's other numbers look particularly promising. The company reported a near-$80 million loss last year, worse even than the $68 million fiasco that was fiscal 2008. And while Morton's free cash flow performance wasn't quite that bad, it still managed to burn through $5.6 million over the course of fiscal 2009, leaving just $1.1 million on the table, next to a heaping plateful of debt.

Gag me with a spoon
All of this should explain why I'm less than enthusiastic about Morton's prospects. Sure, the stock's been on a roll ever since management announced on March 3 that it expects to earn as much as $0.30 in profit this year, but analysts who follow Morton's call this prediction unrealistic, and point out that management has struggled to fulfill its promises over the past two years.

Even if Morton's does deliver on its promise this time, though, this would have the stock trading at nearly 20x earnings. If you believe Morton's can grow its profits fast enough to justify this princely sum, by all means, buy the stock. As for me, though, I'll have to pass.

I'm on a no-junk-stocks diet.

Disagree? Feel free. If you find Morton's stock simply delectable, and think Wall Street's right to be gobbling up these shares, tell us why, over on Motley Fool CAPS.