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:

Companies

Recent Price

CAPS Rating (out of 5)

VimpelCom (NYSE: VIP  ) $11.12 ****
Samson Oil & Gas (AMEX: SSN  ) $2.33 ***
Kodiak Oil & Gas (NYSE: KOG  ) $9.66 ***
OCZ Technology (Nasdaq: OCZ  ) $7.44 ***
Clearwire (Nasdaq: CLWR  ) $2.15 **

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.

Up on Wall Street, the professionals think these stocks are the greatest things since sliced bread. (And by "bread," I mean money.) But are they really the best places for you to put your money?

Give the Street points for consistency. Four of the five stocks on this week's list have made prior appearances at one point or another in previous weeks. Kodiak and Samson, for example, showed up back in February, at a time when the Street was fixated on oil stocks. But with Samson still decidedly unprofitable, and Kodiak only barely so (its trailing P/E ratio shows the stock selling for an astounding 508 times annual profit), neither stock can be considered anything more than a speculative investment at this stage.

Sure, in an oil-thirsty world, these speculations may ultimately pay off -- valuation be darned. In contrast, I see little hope that investors will ever see a profit from the bottom two stocks on this list. When Wall Street backed buying Clearwire early last month, for example, I responded that not only was Clearwire not a good stock for your portfolio; it actually looked like a candidate for bankruptcy. Likewise, I've noted in the past that OCZ Technology is a company whose astounding revenue growth is exceeded only by the frenzied pace at which it burns shareholder cash. I've bet against it (successfully) on CAPS in the past. I'll happily take the opposite side of Wall Street's trade again today.

A better way to make money
And this finally brings us to the single stock on Wall Street's buy list this week that actually wins high marks from CAPS investors: Russian telecom VimpelCom.

You may never have heard of VimpelCom. But as CAPS member Ineedmoney101 points out, the company that started as Russia's "Beeline" cell phone operator has since evolved to become "the world's fifth largest telecommunications provider."

Fellow CAPS player ett448 notes that Vimpel's business is grounded in a "stable yet growing sector," while its geographical location "gives exposure to emerging markets in Russia and Eastern Europe."

Best of all, Clint35 tells us that not only does this stock pay a sizable dividend, but it's also "very cheap." It's just that you have to dig a little to find that out.

You see, at first glance VimpelCom looks anything but cheap. Based on reported earnings of $488 million over the past 12 months, the stock actually looks pretty pricey at a P/E ratio of more than 37. To see how this turns into a bargain price, you need to dig down into Vimpel's cash flow statement, where it's revealed that the Russian telecom operator generated free cash flow four times greater than reported income last year -- $1.9 billion in all. On an $18 billion market cap, this works out to a P/FCF ratio of less than 10 times, which is not too shabby for a stock that analysts, on average, predict will grow at 26% per year over the next five years.

Foolish takeaway
Toss in a dividend yield that at 7.2% exceeds the payout at Russian rival Mobile TeleSystems, and it looks to me like VimpelCom offers the best of many worlds -- a stable industry in a growing region, a solid dividend and strong earnings growth. In other words, a winner, and a strong candidate for your portfolio.

Of course, if you prefer to do your international investing more "locally," there are alternatives. Read about three strong stocks we like even better than Vimpel in the Fool's new report: "3 American Companies Set to Dominate the World." It's available for free download today, but it won't be for long -- so click quick.

Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 375 out of more than 180,000 members. The Fool has a disclosure policy.

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


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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.

  • Report this Comment On April 09, 2012, at 12:01 PM, spokanimal wrote:

    You sound mostly like a "momentum" investor, Rich, and not a "contrarian" investor.

    To each his own.

    S

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