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?
At one point in time, the answer was easy: We didn't know what the bankers were up to -- but no longer. Thanks to the folks at finviz.com, it's now easy to keep tabs on what stocks financial institutions are buying and selling. And thanks to the 170,000-plus lay and professional investors on Motley Fool CAPS, we've also got insight into whether these decisions make sense.
Here's the latest edition of Wall Street's Buy List, alongside our investors' opinions of the companies involved:
|
Companies
|
Recent Price
|
CAPS Rating
(out of 5)
|
| Cloud Peak Energy (NYSE: CLD ) |
$21.65
|
****
|
| Prospect Capital (Nasdaq: PSEC ) |
$12.21
|
****
|
| Ariad Biopharmaceuticals (Nasdaq: ARIA ) |
$6.94
|
**
|
| Avanir Pharmaceuticals (Nasdaq: AVNR ) |
$3.77
|
**
|
| Novavax (Nasdaq: NVAX ) |
$2.51
|
*
|
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 five stocks are the greatest things since sliced bread. (And by "bread," I mean money.) They've been ...
But it's not all risk, all the time. At Prospect Capital, I suspect the main attraction is actually the company's generous, and sustainable, 10% dividend yield. (A lot of Fools like Prospect too, as you can tell from the company's superior four-star CAPS rating.) But perhaps the best deal out there, in the minds of Wall Street and the opinion of CAPS investors alike, is a little company by the name of Cloud Peak Energy, which I told you about last year.
The bull case for Cloud Peak Energy
Sporting a name that evokes pictures as clean as a cool mountain breeze, you might think Cloud Peak was involved in some airy, "Green" business. Wind energy perhaps, or rooftop solar -- anything but what Cloud Peak actually does: coal mining.
And not just any coal mining, either. According to CAPS member sopircepat, this is "cheap powder river basin coal, soon to be connected to port on Pacific ocean," and destined for China.
CAPS member MarkGillCPA explains: Cloud Peak "operates 3 coal surface mines in the Powder River Basin of Wyoming. It is a 2009 spin-off from Rio Tinto. CLD's 3 coal mines are some of the lowest cost mines in the industry."
To top it all off, Cloud Peak's coal may even be environmentally friendly ... or at least relatively so. According to lucapacioli1492, its "low-sulfur, open-pit [coal] makes environmental issues LESS ( but not zero!)"
So as it turns out, perhaps Cloud Peak has a sort of greenish tinge after all. One thing I'm sure of -- at these prices, this stock can make you some serious green. Consider: In an industry where rival miners like Peabody Energy (NYSE: BTU ) and Arch Coal regularly fetch prices 25 and 36 times their annual profits (when they even have profits. Other companies, such as Patriot Coal (NYSE: PCX ) , are just trying to break even), Cloud Peak shares sell for the relative bargain price of just 22 times earnings.
And it gets better. With $233 million in free cash flow generated in 2010 (versus $34 million in reported "earnings" under GAAP, Cloud Peak sells for less than six times the amount of cash it generates in a year. And the company has generated similar amounts of free cash, on average, for four years running. (Or would have if it had been independent of Rio Tinto -- the spinoff is just over one year old as of this writing.)
Foolish final thought
Mind you, no one's expecting much more growth at Cloud Peak any time soon. (You might even say the profit cycle has "peaked.") On average, analysts predict flat earnings from now through the foreseeable future.
Still, even without growth, six times cash profits is a pretty cheap price to own a steady performer like this one. Seems to me, both Wall Street and Main Street have found themselves a winner on the heights of Cloud Peak.
Or so say I. But what do you think? Click over to Motley Fool CAPS now, and yodel your opinion of Cloud Peak.
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