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?
Once upon a time, we didn't know what the bankers were up to. Now, thanks to the folks at finviz.com, it's easy to keep tabs on the stocks that financial institutions buy and sell. And the 170,000-plus lay and professional investors on Motley Fool CAPS can lend us further 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)
|
| Penn Virginia Resource Partners (NYSE: PVR ) |
$25.57
|
****
|
| Insmed (Nasdaq: INSM ) |
$8.32
|
**
|
| ZAGG Incorporated (Nasdaq: ZAGG ) |
$9.56
|
*
|
| HyperDynamics (NYSE: HDY ) |
$3.32
|
*
|
| Tesla Motors (Nasdaq: TSLA ) |
$27.55
|
*
|
Companies are selected based on past-3-month changes in institutional ownership, as reported on finviz.com. 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 ...
Now granted, most of our CAPS members think poorly of Wall Street's picks. But there is one stock on this week's buy list that's Fool-approved: Coal and gas property "manager" Penn Virginia, which not only beat the pants off earnings estimates last month, but sports a four-star rating on CAPS. Why are investors so hot for this energy stock? Let's find out, as we examine:
The bull case for Penn Virginia Resource Partners
CAPS member Clint35 sees a lot to like in Penn Virginia, starting with the fact that its dividend is "yielding 7.30%." (Actually, it's yielding 7.5% today.)
CAPS All-Star (and fellow Fool) TMFDeej agrees that now's a great time to "add tis high yield stock. Also, the recent anti-nuke sentiment may make some people think that coal isn't actually that bad."
And ytcwrkz seconds the emotion: "Solar, wind, biomass, geothermal et al, sound cool [but c]ognoscente are digging coal and nukes. A hard cold reality beats sunny obsequiousness."
But can hard coal reality beat the market? Call me a crazy optimist, call me a Fool -- but yes, I think Penn Virginia can.
Priced at 28.5 times earnings, Penn Virginia isn't the cheapest coal stock on the market. Consol Energy (NYSE: CNX ) costs only 24.5 times earnings for example, while Peabody Coal (NYSE: BTU ) looks like a relative bargain at a P/E of just 19.5. Penn Virginia is also far from the fastest grower in the industry. Whereas analysts have Peabody pegged for 22% long-term earnings growth, and even Consol is expected to post 10% annual gains, Penn Virginia is expected to grow only 3% per year over the next half decade -- but that's OK.
Foolish takeaway
When you consider that Penn Virginia pays out 7.5% annual dividends, versus the sub-1% payouts more common at true coal mining companies, the stock's valuation looks a whole lot more reasonable. When you consider further that your average S&P 500 stock returns 10.5% annual profits over time, and that Penn Virginia's dividend alone gets you close to 75% toward that target, the chances of this stock beating the market rise substantially.
Or so say I. But what do you think? Tell us on Motley Fool CAPS.
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