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?
Once upon a time, we didn't know what the bankers were up to. Now, thanks to the folks at finviz.com, it's easy to keep tabs on the stocks that financial institutions buy and sell. And the 180,000-plus lay and professional investors on Motley Fool CAPS can lend us further insight into whether these decisions make sense.
Here's the latest edition of Wall Street's Buy List, alongside our investors' opinions of the companies involved:.
(out of 5)
|Ancestry.com (Nasdaq: ACOM )
|OCZ Technology (Nasdaq: OCZ )
|Sunrise Senior Living (NYSE: SRZ )
|Sify Technologies (Nasdaq: SIFY )
|Cell Therapeutics (Nasdaq: CTIC )
Companies are selected based on past-three-month changes in institutional ownership, as reported on finviz.com. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.
Wall Street vs. Main Street
Up on Wall Street, the professionals think these five stocks are the greatest things since sliced bread. (And by "bread," I mean money.) They've been ...
- Thinking Cell Therapeutics just might have a winner with its new Pixantrone cancer drug.
- Looking for Sify Tech to continue capitalizing on Indian Internet market growth.
- Betting that investors are overreacting to (or overestimating the chances that Congress will pass) an Obama administration plan to cut medical reimbursements for rehabilitation services -- and that shares of Sunrise Senior Living will bounce back.
- Rushing to take advantage of investors who aren't reacting strongly enough to the low forward earnings price tag of 9 at OCZ.
Of course, judging from the two-star ratings CAPS members are handing out, few investors are rushing to follow Wall Street's lead on these stocks. In contrast, one stock Wall Street and Main Street investors both believe looks attractive is a little Internet outfit we like to call ...
Long-standing wisdom holds that you should never look a gift horse in the mouth. Common sense would indicate that it's even less advisable to examine a gift bear market in the teeth. One week ago, I highlighted Ancestry as a hard-dropped "superball stock" that was just about ready to bounce back. When the stock instead cratered -- along with nearly every other stock on the Dow Jones Industrial Average (INDEX: ^DJI) -- it seems this only made investors more interested in buying Ancestry. Why?
At 26 times earnings, and with 21% long-term growth projected for it, CAPS member eksummers620 calls Ancestry a "cheap growth stock."
Winnerfrommidlan agrees that the stock offers "[r]apid growth and [a] reasonable PE."
Meanwhile, All-Star investor BoiseKen reminds us that after "a niche leader" like Ancestry declines in price sharply, buying "high beta [stocks] like these can make for nice [long-term] gains."
I agreed with this way of thinking last week, and today, at a price that's 12.5% cheaper, I guess I'm ... 12.5% more convinced that the stock is a bargain. Remember: While 26 times earnings may not be an obvious bargain at 21% growth, Ancestry's "P/E" ratio doesn't fully reflect the value in this stock. Over the past 12 months, Ancestry has generated more than $102 million in free cash flow from its business, which is more than twice its level of reported profitability.
At today's price, Ancestry.com shares sell for less than 12 times annual free cash flow. At 12% annual growth, I'd think that would be a fair price to pay. At 21% growth ... it's a steal.
Want to find out if Rich is right about Ancestry.com? Add the stock to your watchlist and read along as the story plays out.