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:
|
Company
|
Recent Price
|
CAPS Rating
(out of 5)
|
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Qiao Xing Mobile (NYSE: QXM )
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$3.36
|
****
|
|
JA Solar (Nasdaq: JASO )
|
$8.68
|
****
|
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DG FastChannel (Nasdaq: DGIT )
|
$20.91
|
****
|
|
Tessco Technologies (Nasdaq: TESS )
|
$16.06
|
****
|
Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money after close of trading on Friday. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.
Wall Street vs. Main Street
Up on Wall Street, the professionals think these four stocks resemble dogs with fleas, but down here on Main Street … well, just call us the SPCA. While we admit to the possibility of infestation, CAPS members see plenty here to love.
For example, All-Star investor ceejayoh jumps for joy to find Tessco a "tech company with little debt." (In fact, it has no net debt at all.) Meanwhile, at DG FastChannel, a low price-to-earnings ratio and strong cash flow catch CAPS member tomfoolme's eye. JA Solar gets a nod from CAPS All-Star Geofiz in light of likely long-term demand for its products.
But to my Foolish eye, the most intriguing four-star stock on today's list possesses all of these attributes, in spades.
The bull case for Qiao Xing Mobile
Beijing-based upstart cell-phone maker Qiao Xing Mobile is hard at work thinking up new ways to give Motorola (NYSE: MOT ) migraines and Nokia (NYSE: NOK ) nightmares. The company's operating at a loss, which isn't great news for its shareholders, I suspect. But if that means Qiao Xing is selling its phones for below cost, well, that's one way to undercut rivals on price.
Of course, all this pales in comparison to the real -- and most obvious -- reason to like this stock: its cash. Earlier this year, CAPS member mynameishung highlighted the attraction of a stock possessing "over 500 millions cash on hand;" it's selling for a market cap far below that sum. CAPS member ArgoNate estimated the stock, which even now sells for just $3 and change, possesses "Current Assets-Total Liabilities = $8.04 per share."
They're not the only ones who've noticed the discrepancy. Last month, parent company Qiao Xing Universal (Nasdaq: XING ) offered to buy out its subsidiary at a premium, sending Mobile's shares soaring 40%. Yet the offer of $0.80 and 1.9 Universal shares per share of Mobile common stock still adds up to just $3.65 in value -- nearly 9% above where the shares sit today.
Time to chime in
It appears to me that parent Universal is trying the old Benjamin Graham gambit of buying dollar bills for $0.50 each. In any reasonable world, this offer should have been rejected out of hand. Indeed, Mobile management reports that it's received complaints from outraged shareholders who think the takeover price is too low.
Still, for investors today, it looks like a situation of "heads, I win -- tails, I win more." If the buyout goes through, you make a quick 9% profit. If it fails, you still own a company with twice as much cash as its market cap reflects. Chances are, at some future point, either Universal or another savvy acquirer would make a better offer, and your profits would wind up being significantly more than 9%.
That's how I look at it. There are certainly enough unknowns at work here for any number of opinions. What's yours?
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