The Stocks Wall Street Loves

Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?

Not so fast! With help from the 170,000 members of Motley Fool CAPS, we'll see whether these highflying favorites deserve analysts' unwavering support.

Stock

CAPS Rating (out of 5)

CAPS Bullish Sentiment

No. of Wall Street Analysts

52-Week Price Change

Apple (Nasdaq: AAPL  )

***

92%

57

45%

Frontier Communications (NYSE: FTR  )

***

92%

8

15%

Bridgepoint Education (NYSE: BPI  )

****

97%

6

78%

Source: Motley Fool CAPS.

The power of brand
Even though the nearly five dozen analysts following Apple were on the right side of the ledger in expecting it to beat the market, they once again got punk'd by the consumer-gadget maker. Or, as my daughter might say, they were pwned, which the Urban Dictionary tells me "basically means 'to own' or to be dominated by an opponent or situation, especially by some god-like or computer-like force." They could just as well have said "Apple."

iPhones and now iPads are the bread and butter of crow sandwich it's feeding Wall Street, with iPhone sales growing 142% and iPads up 183%. While the tablet computers are coming off a very small base -- though their traction is far greater than that experienced by either Motorola Mobility (NYSE: MMI  ) or Samsung -- the iPhone juggernaut shows the pent-up demand that still exists for the smartphone and how much of a drag being tethered to AT&T was for Apple.

Perhaps the biggest news was the power Apple exhibited in China, where it generated $3.8 billion in revenue.

There used to be a story about the power of brand and how you could tell Harley-Davidson's reach because people would get its logo tattooed on their body. How much more iconic is it, then, there are actually fake Apple stores springing up in China -- complete with the Apple logo, blue-shirted employees, and Apple products  -- but not affiliated with the company at all? China is known for its piracy, but so great is the demand for Apple that the nation willing to rip off its entire corporate identity. You'd only know you're not in a real Apple store because the stores actually say "Apple Store" on them, which Apple would never do.

CAPS member sesmail hits like a jackhammer all the points why Apple has owned, er, pwned, Wall Street.

Innovative products, huge brand loyalty, incredibly low P/E, crushes analyst estimates. Cash in the Bank. Competition shell shocked! Huge market growth potential particularly with the emerging BRIC members.

Let us know in the comments section below or on the Apple CAPS page whether the stock is ready to climb the mountain or fall off the cliff.

New frontiers
Expansion comes at a cost, but Frontier Communications is in a race to convert the 4.8 million rural landlines it acquired last year from Verizon (NYSE: VZ  ) to its own system by the end of 2012.

Earnings last quarter were hurt by the conversion, though they met analyst expectations and revenues doubled from the year-ago period. But because it's saddled with a heavy debt load and still pays out a pricey dividend, the sustainability has been called into question. The dividend yields 9.7%, similar to peer Windstream's (NYSE: WIN  ) 8% yield, but a payout ratio of 339% makes Windstream's 182% ratio seem staid in comparison.

CAPS All-Star member TSIF is willing to overlook Frontier's debt to accept the dividend, while acknowledging the risk in all of it.

An upthumb on Frontier Communications is a bit of a gamble as their overall fundamentals are not that special. As a provider of communications to small areas they are always in danger of getting their customers absorbed by a bigger player moving in. There is quite a bit of grant money in play to push communications into rural areas. My play is partially on the dividend and how that will play in this sluggish economy.

Add Frontier Communications to your watchlist to keep tabs on whether it's exploring a new frontier or simply revisiting a well-worn path to ruination.

A glowing opportunity
The animus that the Obama administration has shown to for-profit schools culminated in a stunning injection of politics into a usually apolitical GAO study on the sector. The agency alleges that Iowa Sen. Tom Harkin's staff pressured the GAO to include data to support his crusade against the industry, resulting in an error-riddled report that ultimately had to have numerous corrections made to it.

Yet the damage was already done. Corinthian College (Nasdaq: COCO  ) fell as much as 53% in the weeks after the report was released, while ITT Educational Services fell 38%. DeVry and Bridgepoint Education were down 31%. That probably explains why the for-profit education sector was surprised by the Education Department's subsequent decision to water down the "gainful employment" requirement for schools, postponing the harshest sanctions possible until 2015.

While many of the educators rallied in the aftermath of the revisions, Bridgepoint has been one of the stars, rising 55% in 2011 alone. CAPS All-Star XMFConnor found it was the least risky of the bunch: "Essentially, I believed that the for profit sector had fallen so much due to the scrutiny that any company in the sector, regardless of their exposure to potential regulations, was beaten down just like the rest of them. This created too much selling pressure on the players with the least risk, or the 'least bad' in the industry ... such as BPI."

Add Bridgepoint to the Fool's free portfolio tracker for complete coverage of its developments.

Agree to disagree
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.

Sign up today for the completely free service, and tell us whether these stocks deserve to have Wall Street marching in lockstep.

The Motley Fool owns shares of Bridgepoint Education and Apple. Motley Fool newsletter services have recommended buying shares of AT&T and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

Fool contributor Rich Duprey owns shares of Motorola Mobility but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 21, 2011, at 9:06 PM, pryan37bb wrote:

    With regards to FTR, the dividend payout ratio as a function of FCF would paint a clearer picture, since it's closer to 70 or 80%, for reasons I can't remember (depreciation, I think?).

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