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.
|
Companies
|
Recent Price
|
CAPS Rating (out of 5)
|
| Excel Maritime Carriers (NYSE: EXM ) |
$2.07 |
**** |
| Bank of Ireland (NYSE: IRE ) |
$4.46 |
*** |
| YM BioSciences (AMEX: YMI ) |
$1.65 |
*** |
| BioSante Pharmaceuticals (Nasdaq: BPAX ) |
$2.35 |
*** |
| Endeavour Silver (NYSE: EXK ) |
$11.00 |
*** |
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. (Perhaps because most of them cost less than a loaf of bread.) They've been:
Yet it seems few CAPS members are eager to follow Wall Street's lead. Each of the four stocks I've mentioned rates only three stars out of five -- neither screaming buys nor obvious sells. One stock Fools are more optimistic about, though, is four-star-ranked dry-bulk shipper Excel Maritime. Let's find out why, as we examine ...
The bull case for Excel Maritime Carriers
CAPS member Kepzorz says of Excel: "significantly undervalued ... at .12x price/book with a fleet of 47 ships, this company has a huge safety margin of assets to navigate through a global lull in the shipping industry."
Others are less sanguine -- CAPS member mjbizdev, for example, warns that the stock tends to rise or fall depending on whether a given day's "Greek bailout news" is good or bad. (Excel is based in Athens, you see.)
But ace CAPS investor puck42nt sees little risk that Excel will go down with Greece's ship: "It is trading at 1/5th of book value and 1x annual EBITDA. It paid down debt in the last quarter and has 5x interest coverage based on operating cash flows."
And if you ask me, that's key. You see, with Excel, debt is more important than market cap right now. The company's capitalized at just $165 million, but it has $1.1 billion in gross debt. That's why, when I value the company, I do so on the basis of enterprise value-to-free cash flow, rather than P/E, P/S ... anything price-related, in fact.
And when I run the numbers this way, what I come up with is a company whose business is now valued at only 13 times free cash -- a company that, despite the many ups and downs experienced in the dry-bulk shipping industry in recent years, has managed to generate strong free cash flow pretty consistently over the past half-decade. That's a trick that Excel rivals such as DryShips (Nasdaq: DRYS ) and Diana Shipping (NYSE: DSX ) , for example, have yet to master.
Foolish takeaway
Now mind you, if all Excel can manage is to grow at the 5% annualized rate that Wall Street expects of it, I'm still not convinced the shares are cheap just yet. But they're a darn sight cheaper than any of its cash-burning rivals and probably a better bet to survive the Great Recession than certain rivals to boot.
Not quite ready to invest in a debt-laden, dividend-less, slow-growing shipper -- regardless of its potential? Fair enough. How about a handful of financially sound, generous dividend payers instead? Discover the possibilities in the Fool's new -- and free! -- report: "13 High-Yielding Stocks to Buy Today."
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