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 are snapping up these stocks just as quickly as they can reach the "buy" button. Meanwhile, Main Street investors seem happy to oblige 'em. The only stock on the list that CAPS members want to keep in their portfolios, it seems, is JA Solar Holdings.

Why has Wall Street taken a shine to China's JA Solar? Why do Fools think that's a bright idea? We're about to find out -- so put on your sunglasses and apply some suntan lotion, as we lay out for you ...

The bull case for JA Solar Holdings
CAPS All-Star Babachrono likes JA Solar's "[g]ood cash to debt" ratio, and notes that the company's recent "guidance ... will be in line with 09 predictions." Other pluses include "26% insider [ownership], good solid company for a solar play as green energy will come back into focus."

Fellow CAPS member BengalPennyCAPS calls this one a:

... long-term play for sure. Razor-thin margins will hurt in the short term. It will help that the company is located in China, as, aside from their coal addiction, the Chinese are more on top of solar trends than us old-school folk in the US. Not a bad debt position at all, and the forward P/E is very favorable.

Last but not least, another All-Star -- this time mrindependent -- agrees that the company "looks financially stable and it is a good play on two trends I believe in: (1) the solar industry should thrive under Obama presuming petroleum does not collapse any further and (2) China should rebound stronger than the United States given its higher volatility and better prospects."

So basically, we've got three themes at work here:

• President Obama's love of solar energy.
• China's need for energy -- be it coal, oil, or solar.
• And China enjoying stronger growth prospects than we "old-school folk" here in the States do.

All three arguments have their merits, but are they enough to make JA Solar a buy?

Um ... no
Personally, I'm skeptical. Oh, as far as its balance sheet goes, JA Solar boasts $283 million in cash and equivalents against just $225 million in long-term debt. So the bulls are right on that point; JA Solar does have a good cash position -- stronger than SunPower's (NASDAQ:SPWRA) at least, if not quite as rock -olid as First Solar (NASDAQ:FSLR). But I'm not sure how long JA Solar will remain that strong.

You see, although JA Solar booked profit in each of the past three years, the company rarely divulges cash flow data in support of that assertion. (For example, we still do not know the amount of cash it generated last year. And look at the negative free cash flow in 2007.) In addition, the company surprised Wall Street by reporting a loss last quarter.

Sure, JA Solar's stock  and the rest of the solar industry benefited from China's ambiguous announcement of a planned subsidy program last week. But until the company improves its disclosure practices, and makes a better effort to give investors the information we need to accurately judge its profitability, we should be wary. Simply put: Investors deserve better.

Time to chime in
But hey, that's just my opinion. As you can see above, some of the smartest investors on CAPS do like JA Solar quite a bit. So feel free to disagree with me if you like. Click over to CAPS and tell us why you think this stock's a buy.

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