Wall Street's Buy List

If actions speak louder than words, 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 supplies MSN Money's list of 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 82,000-plus lay and professional investors on Motley Fool CAPS agree with Wall Street's opinions, it might be time for some buying.

Here's the latest edition of Wall Street's wish list, enhanced with CAPS investors' opinions of the companies involved.

Stock

Currently Fetching

CAPS Rating

AmCOMP  (NASDAQ:AMCP)

$12.08

****

Washington Mutual (NYSE:WM)

$16.12

**

Retail Ventures  (NYSE:RVI)

$6.05

**

Matria Healthcare  (NASDAQ:MATR)

$30.69

**

Amrep  (NYSE:AXR)

$35.63

*

Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following close of trading last week. Current pricing also from MSN Money on the same date. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Apparently underwhelmed by Wall Street's favorite stocks this week, Main Street is panning the majority of the professionals' picks and giving just one of them above-average marks. That one: AmCOMP, a small-cap insurer specializing in worker compensation claims.

With a little more than a quarter-billion in annual revenues, AmCOMP is tiny. And Employers Holdings (NYSE: EIG  ) is about to buy it out for $12.50 a share. But if the consensus among investors, including Employers, is that AmCOMP's a buy, I'm willing to listen. Heck, I'm even curious. Let's see what the bulls find so attractive about this company.

The bull case for AmCOMP
What we learn from AmCOMP's CAPS page tells us less why we might want to buy this stock, and more about why Employers decided to buy it. The only pitch anyone has posted since the buyout announcement comes from mxgrandad, who suggests that rather than buy the stock, we "hold steady."

Long before the news broke, however, CAPS proved its usefulness in identifying buyout targets, thanks to the efforts of two other Fools.

  • A year ago, kirket spotlighted AmCOMP as a value based on "low [price-to-earnings ratio], low [price-to-sales ratio], high [return on equity], no debt, good growth potential."
  • Not long afterwards, auminer68 added color to the picture: "This one's getting held down by unknowledgeable investors thinking they're a Florida-based PROPERTY insurer, that's at-risk from hurricane season. ... I can't think of any other reason for it to be dropping like this."

Hmm. Now that's interesting. So you can use CAPS to identify undervalued, misunderstood small-cap stocks, ripe for buyout? Who'dathunkit?

That's one strategy the Fool's award-winning Motley Fool Hidden Gems newsletter service takes when it seeks winners. And I can't help noticing that, like Hidden Gems, the two Fools who spotlighted AmCOMP so long ago (and mxgrandad as well, I might add) are beating the market soundly with their picks.

Now it's your turn
Considering how well the AmCOMP pick has worked out, I'm curious -- do you know of an undervalued, misunderstood small-cap with similar potential? Then come on over and clue us in.

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


Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 29, 2008, at 3:23 PM, thomasc111 wrote:

    Only fools would buy WM at this point in time. WM needs to re-arrange their exec's to enhance their performance.

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