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 140,000-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:

Stock	Recent Price	CAPS Rating (out of 5)
Allis-Chalmers Energy (NYSE: ALY  )	$4.21	*****
Liz Claiborne	$6.07	***
MGM Mirage (NYSE: MGM  )	$13.10	**
YRC Worldwide	$4.10	**
US Airways	$5.43	*

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 professionals see a lot of potential in these stocks, but down here on Main Street, we wonder if the traders should make an appointment with the eye doc. Judging from the ratings they're garnering on CAPS, most of these stocks are dogs -- with fleas.

Every stock but one, that is. We'll take a look at the lone standout today, as we examine ...

The bull case for Allis-Chalmers Energy
CAPS All-Star Teacherman1 calls Allis-Chalmers a "[g]ood company pelted by a weak economy. Look at the oil futures, they are just an indication of what will be happening when the tide finally turns. Take a look at Lime Rock (the company which backstopped their share offering) and you will see that they are not in the habit of backing losers. It will take some time, but this will pay off big in the long run."

In the short run, however, Allis has some significant drawbacks -- chief among them a nearly $500 million debt load, against less than $60 million cash. Fellow All-Star investor tthwebster, however, noted in June that the stock price has finally been "sufficiently reduced to justify the 500M debt load. ... Ending this quarter should be back in black. About 1M $in insider transactions end of May '09 at a share price approximately three and a half bucks."

These transactions caught yet another All-Star's attention. In fact, bklynmp3j liked Allis precisely because of its "insider buying."

What our CAPS members may not have noticed, is the abrupt reversal in insider trading patterns that took place earlier this month. While insiders overall have upped their holdings in Allis over the past six months, the CEO has liquidated some 32% of his stake in just the past few weeks. This looks especially curious in light of what appears to me to be the key reason to want to own Allis today. I'm referring, of course, to last month's news that one of Allis' key competitors, Baker Hughes (NYSE: BHI  ) , intends to buy another rival, BJ Services (NYSE: BJS  ) , in a massive $5.5 billion merger deal.

My fellow Fool David Smith has suggested that this could be the opening gambit in a consolidation game in the oil patch. Baker has made its move, but yet another Allis rival, Schlumberger (NYSE: SLB  ) , still has a pocket full of quarters, and just might be "heading to the arcade" itself. And if you'll permit me to abuse the metaphor just a bit further, this puts a whole new spin on Allis' debt load. While a burden to the smaller company, $500 million amounts to just pocket change for a giant like Schlumberger, which could swallow Allis whole with nary a burp.

Time to chime in
Would such a transaction appeal to Schlumberger -- or peers Halliburton (NYSE: HAL  ) or Weatherford (NYSE: WFT  ) , for that matter?

It might. Allis' price-to-book ratio of just 0.6 has to look attractive to a company like Schlumberger, whose own valuation verges on 4.0. And Allis-Chalmers looks similarly cheap under other metrics -- price-to-sales, enterprise value-to-EBITDA. In short, I could see something like this happening. The only thing nagging at me, though, is this: If there were a real chance of Allis getting bought out, then why would the CEO be cashing out now? Unfortunately for shareholders, I suspect the reason's obvious. The buyout scenario is a pipe dream.

But hey, that's just my opinion -- what's yours?

Tell us all about it on Motley Fool CAPS. It's fun, it's free, and it just might make you famous.