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 150,000-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
With the S&P 500 down 5.5% from its January high, Wall Street thinks now's a great time to buy -- and in particular, to buy the five stocks named above. But Main Street investors aren't so sure, giving most of these stocks a shrug and a three-star rating.

Which stock is the exception? The one stock that both Wall Street and Main Street agree will go higher? That would be drugmaker Momenta Pharmaceuticals, today's top stock.

The bull case for Momenta Pharmaceuticals 
Fools will recognize Momenta as one of the several companies (including Novartis (NYSE:NVS) and Mylan (NYSE:MYL)) that are working to put out generic versions of Teva's (NASDAQ:TEVA) MS wonderdrug, Copaxone. In August CAPS All-Star latimerburned called Momenta "a bit of a gamble. It either runs out of money as its drugs are not approved and goes to zero or it shoots very much higher when one of them is approved. The way I see it is you have 100% downside but 200%+ on the upside ..."

minifesto likes Momenta's "[p]ipeline of Generic, novel and follow-on drugs. Two partnerships with [Novartis subsidiary] Sandoz. Strategy duplicate and re-engineer existing drugs using sugar technology."

Last but not least, All-Star investor kidderpeabodyny is impressed at Momenta's ability to "raise cash in a recession," arguing that this means "somebody knows the potential of the generic products they are working on."

Follow the money
And really, isn't that just what we're looking for when spotlighting the stocks on "Wall Street's Buy List?" The possibility that following the "smart money" can lead us to riches? Problem is, while Wall Street seems to be expressing confidence in Momenta, I'm not entirely certain it's justified. You see, the reason Momenta has been busy raising cash is that, well, it needs cash. Badly.

The company hasn't earned a profit -- or generated a dime in free cash flow -- since it went public. To the contrary, Momenta burnt through nearly $58 million in free cash flow over the last 12 months. At this rate, it will be lucky to last two years before its present cash stash runs out, necessitating another round of dilutive cash infusions -- and this is after Momenta has already run up its share count 170% over the last five years.

Time to chime in
No profit today, iffy prospects for tomorrow, and a clear record of dilution in years past -- these are three key reasons why I do not invest in early stage biotech. And sure, this means that every once in a while I will miss out on "winning big." But at the same time, I know this cautious strategy has saved me from investing in multiple losers -- and it's why I won't be following Wall Street's lead on Momenta.

But, hey, maybe you're a more courageous Fool than I. If you believe Momenta has the makings of a momentum stock, here's your chance to tell us why. Click over to Motley Fool CAPS now, and sound off in favor of Momenta.

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