The Wall Street Buy List

"Actions speak louder than words."

It's an old saying, with more than a grain of truth to it, I'll warrant. So why is it that when the Wall Street firms merely "initiate coverage" or "upgrade" their ratings on a company, that gets all the news coverage? After all, those are only words, when what really matters is how the big boys act. Luckily for Wall Street watchers, finding out which professionals put their money where their corporate mouthpieces are has become relatively easy in this Internet age of ours. All we have to do is read MSN Money's list of which companies the Street is most actively buying.

But once we've done that, what next? After all, "Monkey see, monkey do" may not make for the soundest of investment strategies. That's where Motley Fool CAPS can help. The Fool's newest venture into the realm of collective intelligence collects ratings from more than 60,000 lay and professional analysts, then overweights the most successful raters' opinions to come up with a "CAPS rating" from one to five stars (five being the best). We check the star power of the Street's sweethearts, and if the smartest investors in Fooldom say Wall Street's right to be buying, that should get your attention.

Let's meet today's list of contenders:

Wall Street vs. Main Street
Wall Street's hottest picks get a generally warm reception on Main Street this week, with the majority of the stocks on our list enjoying above-average endorsements on CAPS. But in this column, as in Highlander, in the end there can be only one. Top honors this week go to insurance industry software writer Ebix, which trounces its rivals with a five-star CAPS rating and the unanimous support of all 42 CAPS players who've looked at it.

But does the fact that Wall Street likes it, and our All-Stars love it, make this stock a buy? Let's hear what our players have to say before deciding:

The bull case for Ebix

• We begin with CAPS All-Star STORMSTOCKER, who writes: "Insurance companies are 'way behind the internet 8 ball' when it comes to sales, pricing, service, and billing. ... This company has a great [niche] to work in; there are a ton of ins. business to help get on the internet highway. This company seems to be steering them in the right direction and getting well paid for it."
  
• imabugger agrees: "fun and games are over in the insurance industry. small players will continue to buy ebix products in an effort to lower operating costs or go out of business."
  
• venturacc points out that despite the firm's prospects, Ebix still has a "Low p/e," is growing "by [acquisition] and internal means," and has "a small float due to large insider and institutional ownership (an [insurance] company and an investment co)."

After all that enthusiasm, let's take a quick reality check, shall we? We'll begin with the price-to-earnings ratio (P/E). It may have been low back in May, when venturacc wrote that last pitch. Today, however, Ebix sports an above-market-average price of 21 times trailing earnings. It's hard to say for sure whether that is a fair price to pay, seeing as no analysts have published growth estimates for the firm, which makes it difficult to posit a PEG ratio for the stock. That said, if Ebix can maintain anything like its recent performance (sales were up 40% year over year last quarter, and profits 68%), today's 21 P/E could well be a bargain.

As for the float, at just 2.8 million shares, it's certainly "small," as venturacc says. Also correct (despite Yahoo! Finance's mistaken assertion that insiders own less than 1% of the stock) is the fact that insiders own a substantial stake in the business. Actually, make that "insider." CEO Robin Raina owns a good 12.7% of Ebix's stock. I take that as a good sign.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Wall Street's favorite stocks -- or even what our All-Stars are saying. We also want to hear what you know about Ebix. Are the bulls right? Or is there baloney in the air? Now's the time to tell us what you think.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.  

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 248 out of more than 60,000 players. Chipotle is a Motley Fool Hidden Gems and Motley Fool Rule Breakers newsletter recommendation. The Fool has a disclosure policy.