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?

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 180,000-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:

Company

Recent Price

CAPS Rating 
(out of 5)

Telefonica (NYSE: TEF  ) $19.99 *****
Flagstar Bancorp (NYSE: FBC  ) $0.60 **
E-Commerce China (Nasdaq: DANG  ) $5.42 *
Oncolytics Biotech (Nasdaq: ONCY  ) $3.96 *
Carbonite $13.28 *

Companies are selected based on past-three-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. But from an impartial observer's perspective, it looks more like Wall Street's gone on a fishing expedition. Bottom-fishing, that is.

Take cancer researcher Oncolytics and cloud-computing play (and excellent Han Solo preservative) Carbonite, for a couple examples. Oncolytics is down significantly from the levels at which it traded earlier this year, while Carbonite, a recent IPO, is off its post-debut highs as well.

E-Commerce? Dang! "China's Amazon.com" has lost 85% of its value since January. And Flagstar Bancorp, a favorite of "vulture investor" David Matlin, isn't doing much better. That one's destroyed 80% of Matlin's investment in just two years.

But it's not all bad news. Last month I profiled another deep value play, describing how Spain's Telefonica could make it rain for investors. Since then, the stock has beaten the market's returns. As the Dow Jones Industrial Average (INDEX: ^DJI) gained just 3%, Telefonica more than tripled that return -- up 11% by the end of Friday trading. And unlike with the other stocks named above, Fools remain firmly optimistic that there are more gains in store for Telefonica. Let's find out why.

The bull case for Telefonica
As I wrote back in September, Telefonica was getting rave reviews from some of CAPS' smartest members. Fools like All-Star investor tenmiles, who praised the company for "investing heavily in more rapidly growing Latin American regions -- announced 1.5B new investment in Peru. Dividend has seen annual increases for last five years -- likely total return market beater from these levels for those holding over next several years."

And CAPS member winebroker2000, who predicted that Telefonica's "Latin American operations will be their cash cow."

More recently, All-Star investor nibs61 phoned in a report from on the ground in "Central and South America [relaying that] every woman there is on there cell phones all day. It is a growing market and essentially getting to be a must have which will spark this stock to new levels."

So far, so good. The investment thesis has played out pretty well over the past month. But what about the months and years to come? Well, reviewing the numbers, we find Telefonica a bit more expensive than when we last checked in -- but still a bargain.

At 7.3 times earnings, the stock continues to offer a small discount to the valuation at American peer AT&T (NYSE: T  ) , and a much bigger discount to Verizon (NYSE: VZ  ) , which costs more than twice as much, P/E-wise. Crucially, Telefonica stock still pays a superior dividend -- 9% versus AT&T's 6% payout and Verizon's 5.5% dividend.

Time to chime in
Long story short, I still see value in these shares. Dividend-rich, value-priced, and five-star rated on CAPS, Telefonica looks like a winner.

Is Rich pushing his luck on Telefonica, doubling down on a stock that's already beaten the market by such a big margin? Add the stock to your watchlist and find out.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 302 out of more than 180,000 members. The Fool has a disclosure policy.

The Motley Fool owns shares of Telefonica. Motley Fool newsletter services have recommended buying shares of AT&T.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

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.

Be the first one to comment on this article.

DocumentId: 1567186, ~/Articles/ArticleHandler.aspx, 4/20/2014 4:57:43 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement