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 165,000-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 after close of trading on Thursday. Recent price and CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Up on Wall Street, the pinstripe-and-wingtip crowd are buying these stocks with abandon. But is that the right call?

A lot of Fools think it is. Consider the cases of Vivus. Here we find CAPS All-Star zzlangerhans betting on a positive ruling from "the FDA advisory panel for Qnexa on July 15. ... Of the three weight loss drugs vying for FDA approval in the coming year, Qnexa unquestionably has the best efficacy data, especially after Orexigen's (Nasdaq: OREX) embarrassing downward revision of their data for Contrave."

In contrast to zzlangerhans' moonshot attempt, CAPS member PizzeriaMan takes a more traditional approach in recommending Boston Beer: "high single digit profit and Double digit operating margins; ZERO debt- fundamentally sound balance sheet." What's not to like?

Of course, if you like Boston Beer's balance sheet, you'll absolutely love today's top CAPS pick.

The bull case for Diamond Management & Technology Consultants
Why invest in Diamond(s), rather than beer or biotech? CAPS All-Star jrwatkins2008 gives us a few reasons. First, like Boston Beer, Diamond's has no debt. Even better, it's got a lot of cash. Last but not least, with so much cash on hand, and more pouring in, Diamond's able to pay a very high yield on its dividend -- 3.2% as of last night. (Boston Beer, for the record, pays no dividend whatsoever.)

And Diamond has been shining the lantern of value for quite some time. CAPS superstar tenmiles first pointed it out to us nearly two years ago: "Debt free microcap consulting company with almost 45% of market cap currently in cash." Numbers like these, combined with even halfway decent management, should turn the stock into a "Diamond in the Rough," according to tenmiles. The stock has since crushed the market's returns.

But what about the next two years -- and beyond? All-Star investor Chemdawg argues: "anything that helps business get more from their money seems well positioned to make a decent amount of money, plus they are efficiency experts, so it would seem they would run a fairly tight ship."

Tight as supercompressed carbon
Tight? I'll say. In fact, with $56 million in the bank, and not a dime of debt, Diamond's balance sheet looks almost impregnable. But more cash never hurts, and for that reason, the company's continuing to run the cash machine full press. Over the last 12 months, free cash flow at this tiny giant of the consulting world topped $21 million -- fully 70% more than the $12.4 million the company reported as net income according to GAAP.

Diamond's trading for less than 15 times free cash flow, yet it's expected to grow earnings faster than 17% per year. It's also loaded with cash and carries zero debt, all of which sounds pretty attractive to me.

On a final note, I should mention that I've known of, and respected, Diamond for years. Way back in 2005, when it was known as DiamondCluster International, I cited the company's reports criticizing use of offshore software programmers like Infosys (Nasdaq: INFY) and Mahindra Satyam (NYSE: SAY) in a column predicting the ultimate demise of outsourcing as a phenomenon, and the return of "offshored" jobs to American shores.

Foolish takeaway
I only wish that back in 2005, I had taken the logical next step, and proceeded from observing "These guys sure are smart!" to asking, "Hmm, I wonder if their stock is cheap, too?" Because as it turns out, it was -- and it is.

Of course, that's just my opinion. What's yours?