Wall Street's Wish List

"Actions speak louder than words."

It's an old saying, with more than a grain of truth to it, I'll warrant. So why is it that when the Wall Street firms merely "initiate coverage" or "upgrade" their ratings on a company, that gets all the news coverage? After all, those are only words, when what really matters is how the big boys act. Luckily for Wall Street watchers, finding out which professionals put their money where their corporate mouthpieces are has become relatively easy in this Internet age. All we have to do is read MSN Money's list of which companies the Street is most actively buying.

But once we've done that, what next? After all, "Monkey see, monkey do" may not make for the soundest of investment strategies. That's where Motley Fool CAPS can help. The Fool's newest venture into the realm of collective intelligence collects ratings from more than 22,000 lay and professional analysts, then overweights the most successful raters' opinions to come up with a "CAPS rating" from one to five stars (five being the best). If Wall Street's buying and the smartest investors in Fooldom say they're right to do so, then that should get your attention.

And so, let's meet today's list of contenders:

30-day price increase

Currently fetching

CAPS rating

Secure Computing (Nasdaq: SCUR  )

46%

$8.75

****

XOMA (Nasdaq: XOMA  )

47%

$3.04

***

WebEx Communications (Nasdaq: WEBX  )

38%

$45.79

**

Theragenics (NYSE: TGX  )

66%

$5.02

**

Investors Financial Services (Nasdaq: IFIN  )

44%

$61.00

*

NxStage Medical (Nasdaq: NXTM  )

47%

$12.51

*

Cuisine Solutions (AMEX: FZN  )

37%

$7.89

Not rated



Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following the close of trading that week. Price increase and current pricing also provided by MSN Money on the same date. CAPS ratings from Motley Fool CAPS.

Chickens and eggs
Another well-worn saw asks us: Which came first, the chicken or the egg? As you've noticed by now, one characteristic that each of these stocks has in common is that they've experienced dramatic price increases over the past 30 days. But are the Wall Streeters buying because the stocks have gone up -- playing the momentum game -- or is their heavy buying causing the prices to spike? It could even be a combination of the two, a vicious circle of some buyers pushing the price up, and others hopping aboard the bandwagon and enjoying the ride.

Ready to fly?
Much like last week, CAPS players beg to differ with Wall Street's latest wish list. Of the seven stocks listed, more than half get tagged with subpar star ratings. Practically no one has heard of American Stock Exchange-listed Cuisine Solutions (despite its being featured in a Washington Post article just last week). In fact, just one company gets the nod from our community of lay and professional analysts. That firm: Motley Fool Rule Breakers recommendation Secure Computing, featured in our October 2006 edition of the newsletter.

No surprise there. Over the four months since we recommended Secure Computing, it has already walloped the market's return, beating the S&P 500 by 19 percentage points. That's enough to make any stock popular. But aside from the fact that it's crushed the market, what else do we know about Secure Computing?

In his recommendation for the newsletter, fellow Fool Tim Beyers described the company as follows:

"Founded in 1984, Secure Computing is what it sounds like -- a provider of devices that secure networks. It also generates service revenue from upgrading and maintaining appliances for its 18,000 customers. Last year, the company broke the $100 million sales barrier for the first time."

Here's what CAPS players have to say:

  • Leading off is ... Beyers (whose CAPS username is TMFMileHigh), who praised Secure Computing months before he formally recommended it (yet another reason investors should pay attention to CAPS). In August, Tim described Secure Computing as being "in the unified threat management space, mostly with hardware. The devices sit in front of a network to identify and swat digital pests before they reach users, an improvement over a classic software firewall." Tim also liked the insider buying in July and August.
  • Some months later, CAPS all-star HighCap took advantage of a drop in price to chime in, observing that: "Cash from ops is still growing and is being used wisely for capital investments and acquisitions. Recent acquisition of CipherTrust should give SCUR the upper hand in proactively blocking spam and malicious IP's."
  • Another All-Star player, nestbroker, "particularly like[s] the current knowledge base they are building to be able to index the threat level of email that travels the net."

You've heard from our professional analyst. You've heard our lay analysts' response. Now it's your turn to tell us what you think on Motley Fool CAPS.

You see, on CAPS, it doesn't matter if your name has a TMF in front of it or a CFA after it. Unlike Wall Street, we welcome all comments on CAPS, where the best arguments -- and the best records -- carry the day.

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 ranked 43 out of more than 22,000 raters. The Fool has a disclosure policy.


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