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?

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 130,000-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:

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
Wall Street traders can't get enough of these stocks. They love 'em all to pieces. But Main Street investors? Our opinions run the gamut. We loathe MBIA, its business of insuring mortgaged-backed securities, and its monster debt load. We're cool toward Century Aluminum and the prospects for the metals industry. In fact, there’s only one stock in this group we absolutely adore: Myers Industries.

Why? Honestly, I'm not too sure -- this is the first time I've heard of the company. But Myers has developed quite a following among some of the very best investors in CAPS-land. To learn why our CAPS "All-Stars" think plastics are the future, we turn now to examine ...

The bull case for Myers Industries

• Inspired by Goldman Sachs' (NYSE:GS) abortive attempt to buy Myers back in 2007, CAPS All-Star MJKpayday looked into the company in December 2007 and discovered "a good company with great historical owner earnings." (Goldman apparently spent a lot of time watching reruns of The Graduate that year. 2007 also saw the banker brokering a deal to sell off General Electric's (NYSE:GE) plastics division.)
• Four months later, the Fool's own TMFMattyA took a look and found Myers chock-full of "diverse products that people aren't going to stop using anytime soon. Moreover, Myers has a strong history of generating stable free cash flow, and a management team that is focused on paying down debt, cutting costs, and growing the business." He concluded: "[I]f Myers was good enough for Goldman at $22.50, it is good enough for me at $12!" (Logically, therefore, it must be a great price at $7 a share, right?)
• Yet another of our All-Star investors -- devoish, this time -- thinks so. Writing last fall, devoish argued that the company's "sales from exports will likely increase as US sales decrease," adding: "I am personally very familiar with their automotive products, and they are the low cost provider of quality. If their other products are similar this should be a good company for a long time to come."

Of course, making quality products is only the first step to investment success. The company also needs to profit from them if it's to reward shareholders. So how is Myers doing in that regard?

Pretty well, as it turns out. Myers generated nearly $21 million in free cash flow last year. Not bad for a company that, judging from its surface-level numbers, appeared to be running at a loss in 2008 (a loss caused entirely by impairment charges taken in the fourth quarter).  But, you say, Myers looks rather expensive at an enterprise value-to-free cash flow ratio of over 19. However ...

… last year was an abnormally bad year for Myers. In the last three years, this company has earned lots more free cash than it did in 2008 -- up to 3.7 times as much. You have to travel back 15 years to find a year in which the firm failed to generate free cash. Consistent performance -- in good economies and bad -- appears built into Myers' corporate DNA. So I find it hard to believe that this company is going to let a little thing like the worst recession in 80 years derail its business. This one's a survivor.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Myers Industries -- 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.

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