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:
|
Company
|
Recent Price
|
CAPS Rating (out of 5)
|
|
Spartan Motors (Nasdaq: SPAR )
|
$5.77
|
****
|
|
Suntech Power (NYSE: STP )
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$14.49
|
****
|
|
Berry Petroleum (NYSE: BRY )
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$15.19
|
****
|
|
Central European Distribution (Nasdaq: CEDC )
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$17.50
|
****
|
|
Dendreon (Nasdaq: DNDN )
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$7.30
|
**
|
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.
The stars align
It happens more rarely than blue moons, but it does happen: Sometimes, Wall Street and Main Street see a stock, and both think it's a buy. This week, the stars have come (mostly) into alignment. We're presented a list of Wall Street's favorite companies, and in four cases out of five, everyone agrees that these are no-brainers -- obvious buys.
But which one is the best buy? You may be surprised to learn (but you shouldn't) that my money is not on the one stock bearing the imprimatur of a Motley Fool Rule Breakers recommendation (Suntech). Rather, I see the most compelling value in tiny Spartan Motors. I'll explain why in a moment, but first, a few words from the Fools who spotlighted this pick for us in the first place.
The bull case for Spartan Motors
CAPS member Senate024 effuses: "Spartan has a clean balance sheet with very little debt, a decent dividend, good current ratio, very low price/earnings, and has shown good EPS growth in the past several years," and concludes: "Benjamin Graham would have loved this stock."
Many people know Spartan through its role as a supplier of chassis for recreational vehicle manufacturers, but as Halburt pointed out back in December, in addition to building RV chassis, Spartan builds emergency response vehicles and supplies parts to builders of Mine-Resistant Ambush-Protected vehicles (MRAPs), such as BAE Systems, Force Protection (Nasdaq: FRPT ) and General Dynamics (NYSE: GD ) .
Speaking of "emergency response vehicles," one of the great things about CAPS is that, with 130,000 investors and counting, we're bound to have a few contributors who can offer firsthand insight into the companies they rate. Take ct2twenty for example, who tells us a bit about this particular side of Spartan's business:
I have been driving a Spartan chassis fire engine for many years now. ... it is important for people to understand that in the fire service, Spartan chassis are consistently thought of as high quality equipment. They are well built and have managed to incorporate the new diesel exhaust standards without compromising cab space. As a mechanic, they hold up extremely well to the rigors of emergency use. When we spec new apparatus, we immediately 'pen in' Spartan.
And I have to tell you, folks -- from the numbers I'm looking at, you might just want to pencil in some Spartan shares yourself. The firm's 4.4 P/E ratio looks almost too good to be true, but if you dig into the firm's cash flow statement, you'll find that it almost is true. The firm's $40.2 million in trailing free cash flow backs up fully 94% of reported net earnings -- close enough to 100% for government work (and Spartan does an awful lot of government work).
To me, this bespeaks very high quality of earnings at Spartan. When combined with:
- A resulting 5.0 enterprise value-to-free cash flow ratio;
- A modest $13 million in net debt;
- Strong estimates of nearly 14% annualized ...
... Spartan Motors looks to me like an attractive prospect. It deserves its spot on Wall Street's buy list -- and, importantly, on yours.
Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Spartan Motors -- 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.
Motley Fool CAPS: It's fun, it's free, and it just might make you famous.
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