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 170,000-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:

Companies	Recent Price	CAPS Rating (out of 5)
Local.com  (Nasdaq: LOCM  )	$6.20	****
Ciena (Nasdaq: CIEN  )	$21.42	***
Acme Packet (Nasdaq: APKT  )	$57.98	**
MannKind (Nasdaq: MNKD  )	$8.02	**
Wave Systems (Nasdaq: WAVX  )	$3.49	*

Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money after close of trading on Friday. 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. (And by "bread," I mean money.) The pros are:

• Hopping the momentum train at digital security specialist Wave Systems, up 160% so far this year.
• Backing Deutsche Bank's "buy" recommendation on Ciena.
• Betting that Acme Packet will continue delivering.
• Piling into MannKind postcrash, hoping the FDA will revive the stock by approving inhaled insulin drug Afrezza.

The MannKind theory may have the best chance of working out. After all, the FDA did approve Pfizer's (NYSE: PFE  ) Exubera, a rival product, and some CAPS members think Afrezza is a superior product. But they aren't convinced that any of those four stocks will wind up beating the market, rating most of them only one or two stars. Based on the ratings handed out by our 170,000-member community, it appears that the only stock with any chance of outperforming the market from this point onward is four-star Local.com.

Local.com
What's the attraction in this Internet advertising company with a $100 million market cap? I can sum it up in one word: Groupon. Earlier this month, Google (Nasdaq: GOOG  ) sparked passionate debate over its decision to attempt to buy Groupon. The Fool's own Rick Munarriz called it Google's "$6 billion mistake," arguing that just about anybody can duplicate what Groupon's already doing -- or, alternatively, buy a company (like Local.com) that's in basically the same line of business and spend a heckuvalot less than $6 billion for it.

Admittedly, Local.com is a whole lot smaller than Groupon. But according to CAPS member dmontieth, it's quality that matters: Local.com "has made consistent improvements in earnings, sales and subscribers. It's also won numerous awards by their industry," wrote this member.

CAPS member shashanksoni was pretty sure that if Groupon went Google, and Amazon.com shacks up with LivingSocial, then ultimately Local.com would be acquired by Yahoo!. On the other hand, Fools have been predicting a Local.com buyout for years, suggesting acquirers including Yahoo, Google, and Microsoft.

Fallback position
And yet ... what if it doesn't get bought up? Relying on a buyout to salvage an ill-considered investment is pretty (small-f) foolish, after all. Before following in Wall Street's footsteps and buying in hopes a greater (small-f) fool will come along, it's worth asking whether Local.com is worth owning all on its lonesome.

It may well be. Although the company's temporarily too tiny to attract much official Wall Street coverage, and lacks sufficient analyst attention to give us a good idea of its long-term growth prospects, the stock's price certainly doesn't seem unreasonable at just 21.5 times trailing earnings (and only seven times next year's expected earnings). Local.com's price-to-sales valuation -- a mere 1.3-times ratio -- looks similarly cheap relative to valuations ranging from three to six times as large at Google and Yahoo!

Foolish takeaway
Call me crazy, but I actually think Local.com looks attractive as both a buyout candidate and a stand-alone investment. Either way you look at it, I think Wall Street's finally calling one right.

Of course, that's just my opinion. Feel free to disagree. In fact, pull up a soapbox on Motley Fool CAPS, and tell me why I'm wrong.