Wall Street's Buy List

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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?

Luckily for Wall Street watchers, the Internet brings us MSN Money's list of which companies the institutions are buying. True, we should be as skeptical of Wall Street's actions as we are of its words. But when the 105,000-plus lay and professional investors on Motley Fool CAPS agree with Wall Street's opinions, it just might be time for some buying.

Here's the latest edition of Wall Street's Buy List, alongside our investors' opinions of the companies involved:

	Recent Price	CAPS Rating (5 max):
Patriot Coal (NYSE: PCX)	$94.51	****
Cano Petroleum (AMEX: CFW)	$8.20	****
ATP Oil & Gas  (Nasdaq: ATPG)	$43.68	****
Ultrapetrol (Bahamas)  (Nasdaq: ULTR)	$15.81	****
Pacific Ethanol (Nasdaq: PEIX)	$4.18	*

Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.  

Wall Street vs. Main Street
Ah, hydrocarbons, how we do love thee. Wall Street remains enamored of energy stocks this week, buying up shares of companies involved in everything from coal to oil to ethanol.

Meanwhile, over on Main Street, we're considerably more bullish on traditional hydrocarbon stocks than on new-wave energy. Foolish investors wouldn't touch Pacific Ethanol stock with a 10-foot siphoning tube, but 95% of them think Patriot Coal is one hot rock. Here's why:

The bull case for Patriot Coal

• Let's let the Fool with the top CAPS score on Patriot explain his investment thesis to us. Writing back in November, All-Star investor alexandertwd wrote: "Coal is in high demand, and is a good counter to rising oil and gas prices. Coal provides more than 50% of the U.S. electricity and will continue to play a huge role in providing energy in the [U.S] and around the globe including China. As world wide demand for cheap fuel continues to increase, the price of coal will start to rise slowly. Patriot Coal has locked in contracts from the parent company [Peabody Energy (NYSE: BTU)] and will definitely swing to a profit in a year or so."
• Fellow All-Star jester112358 agrees. In February, jester112358 observed that: "People are starting to realize [it's] either coal power or freeze in the dark. Solar is just a pipe dream as scientists realized in the 70s. But we're in another cycle of this dream right now." (I suspect the Fools who recommended Suntech Power (NYSE: STP) over at Motley Fool Rule Breakers might argue that last point, but diverse opinions are what CAPS is all about.)
• beegdawg007 added recently that, "[Patriot Coal's] all in mining cost (does not include taxes) for coal in 2007 was $52/ton. ... I [believe] the 2009 average cost to mine the ... coal will be $54 to $56 .... TOPS. Right now, thermal coal for delivery between Jan.09 and Dec. 09 … is selling for between $96 and $92/ton via futures on the NYMEX. [Patriot Coal] can lock into those prices for thermal coal whenever they decide to. ... Do the math, and you'll be amazed to discover that [Patriot Coal] should earn close to $20/share in 2009."

$20 a share? That's a whole lot more than the $7.20 that analysts predict. If beegdawg007 is right, this could be even more of a buy than even Wall Street believes -- at least in the near term.

Longer term, Patriot's worth may depend more on the amount of coal it has in the ground. As of Dec. 31, 2007, proven and probable reserves totaled 1.3 billion tons. Meaning that right now, you could buy Patriot's coal assets for a bit less than $2 a ton, using enterprise value. Even with mining costs high and getting higher, that seems a very nice price to pay if this commodity keeps fetching near $100 per ton on the open market.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Patriot Coal, or even what other CAPS players are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.