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:

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.

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

Judging by the mediocre two- and three-star ratings that CAPS members are handing out to most of them, they may not be. Take MannKind, for example. The release of preclinical data on its new multiple myeloma drug did little to move MannKind's stock price earlier this month. Evidently, investors are more worried about how this company -- $490 million in debt and burning cash with free cash flow of negative $130 million -- is going to survive to see its products commercialized.

On the other side of the coin, LibiGel maker BioSante is trading for not much more than the cash it has in the bank. But with less than half-a-million dollars in annual sales, and no profits on the horizon, investors may be right. BioSante may not be worth much more than its bank account.

E-Commerce China Dangdang -- the so-called Amazon.com of China -- is likewise unprofitable, and likewise unlikely to become profitable for the next year, at least. Worse, it's most recent earnings report contained ominous warnings of slowing sales growth. Hardly propitious for a hoped-for turnaround play.

Meanwhile, enthusiasm is waning for WPX Energy, considered a top prospect by many CAPS members as recently as a month ago, now that oil prices are in the dumps.

But what about the top-rated stock on today's list? EV Energy Partners works in the energy sphere, so shouldn't investors be as pessimistic about its prospects as they've recently become about WPX? Let's find out

The bull case for EV Energy Partners
A limited partnership focused on producing oil and natural gas, CAPS members differ on whether to consider EV more of a natural gas play or more tied to the price of oil. CAPS member WHC01 thinks the latter, and argues that "with rising output volumes, earnings should rise as long as price of Crude stays near $100/brl."

Meanwhile, CAPS All-Star TMFDeej takes another route to valuation entirely, noting that Wall Street analysts see EV "monetiz[ing] its 150,000 net working interest acreage for $5,000 per acre," and then using this cash to boost EVEP`s distributable cash flow."

So far, so good. Over the past 12 months, EV's managed to produce $165 million in net profits, and $190 million in cash flow from operations. There are, however, a couple of caveats. First, EV's capital spending ate up a good chunk of cash flow this past year -- about $128 million -- leaving actual free cash flow of just $62 million. That's only a fraction of reported profits, and suggests EV may not be as cheap as it appears.

Also worth considering is the fact that Wall Street expects earnings to fall steeply next year, with the result that EV's forward P/E ratio is much higher than the trailing 12 P/E it now sports. Based on 2013's expected numbers, analysts peg EV at about 33 times forward earnings.

Foolish takeaway
Neither of these numbers looks particularly cheap in light of EV's longer-term growth expectations (Wall Street expects earnings to grow at a bare 3% annually over the next five years). And while it's true that EV pays a generous dividend yield of 5.9%, even that may not be enough to compensate investors for the risk of buying such a steeply overvalued stock.

Long story short, while many investors think EV offers good value at today's prices, I honestly don't see it. At a time when oil and gas majors like Chevron are selling for single-digit P/Es while sporting faster growth rates and dividend payouts nearly as high as what EV pays, I see no reason to go down-market and invest in an upstart. Sometimes the tried and true is simply the better bargain.

Speaking of which, in our recent report "3 Stocks for $100 Oil," we've identified three more famous oil and gas names that offer good value to investors today. Download the report, and find out who they are. (But act quickly. The report's free to review today, but it won't be for long.)