Wall Street's Buy List

• Email
• Share
• Print

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 110,000-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:

	Recent Price	CAPS Rating (out of 5):
VSE Corp (Nasdaq: VSEC)	$39.68	*****
JetBlue  (Nasdaq: JBLU)	$5.45	**
East West Bancorp  (Nasdaq: EWBC)	$13.11	*
UCBH Holdings  (Nasdaq: UCBH)	$4.78	*
GeoGlobal Resources (AMEX: GGR)	$3.72	*

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
With most stocks on the list earning subpar one-and two-star ratings, Main Street investors don't seem to think much of Wall Street's favorite picks this week. The sole exception: VSE Corp.

Um, who?
If you've never heard of this little engineering shop, don't fret. Pretty much no one has. Valued at barely $200 million, the stock verges on microcap status. While it's public and has to report its earnings, it does so just barely. Last week's second-quarter report, for example, consisted of a half-dozen paragraphs of text and an income statement. That's it. No cash flow statement, abridged or otherwise. Not even a balance sheet. It's almost as if VSE was trying to slip under the radar. But we caught it.

More specifically, the CAPS community caught it. Then they tossed it on the scales and rated this one a full five stars. Does it deserve them? Judge for yourself as you review:

The bull case for VSE Corp

• Way back last summer, fluxxdeluxx was one of the first CAPS members to trip over this little gem, confiding: "I've heard nothing but positives coming out of this Wall Street-ignored stock since 2006. Last month, VSE acquired ICRC, an IC Company, thus diversifying its business base across a number of project areas including smart vehicles, alternate fuels, large-scale port engineering development and security, and information technology services."
• Do tell! But contracts with whom? DCMonty25 informs us that: "This company contracts with almost every branch of the U.S. Armed Services and has several long-term agreements with the government."
• So is this some kind of fast-growing start-up? Hardly. While not quite as old as its larger rivals Northrop Grumman (NYSE: NOC) or General Dynamics (NYSE: GD), VSE is comfortably well into middle age. As Budsworth told us in April, this "Good solid company [has] been around since 1958 and have a solid financial record."

Now, as I mentioned above, VSE is a bit light on the detail in its earnings reports. It is, however, Johnny-on-the-spot with getting this detail filed with the SEC. According to its most recent 10-Q, VSE currently carries more than $1.5 million in cash on its books. If you use Yahoo! Finance for your stock research, you'll notice that this is a lot less than what they think VSE has.

The reason being that free cash flow turned negative this year. Which brings me to the other document found in the 10-Q, but not in the earnings release: the cash flow statement. According to this one, VSE has burned through about $2 million in free cash flow so far this year.

To me, that's reason enough to stay away from the stock for now. No analysts are following it (at least not officially -- presumably someone researched the thing before Wall Street started buying), so we're flying kind of blind on forward growth expectations. Personally, while I'm willing to take the occasional gamble on a stock with plenty of free cash flow even if I don't know how it will grow, or great growth prospects but a temporary lack of profits ... well, buying a stock that has neither the one nor the other gets me to feeling a little queasy.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about VSE Corp, or even what our CAPS members have to say. We really want to hear your opinion. Click on over to Motley Fool CAPS and tell us what you think.

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