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?
Once upon a time, we didn't know what the bankers were up to. Now, thanks to the folks at finviz.com, it's easy to keep tabs on the stocks that financial institutions buy and sell. And the 170,000-plus lay and professional investors on Motley Fool CAPS can lend us further insight into whether these decisions make sense.
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)
|
| Brigus Gold Corp (NYSE: BRD ) |
$1.48 |
**** |
| Two Harbors Investment (NYSE: TWO ) |
$10.53 |
*** |
| Whiting USA Trust I (NYSE: WHX ) |
$17.50 |
* |
| Columbia Labs (Nasdaq: CBRX ) |
$3.27 |
* |
| St. Joe Company (NYSE: JOE ) |
$25.37 |
* |
Companies are selected based on past-3-month changes in institutional ownership, as reported on finviz.com. 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.) They've been …
And I must say that I've seldom seen a motlier (and not in a good way) bunch of equities gathered in one place at the same time. Judging from the one- star ratings prevalent above, it would appear that most Fools agree with me, but not in one case. When it comes to Brigus Gold, at least, it seems individual investors are just as optimistic about the company as their professional peers up on Wall Street. But why?
The bull case for Brigus Gold Corp
CAPS All-Star freeits sums up the bulls' sentiment in the eloquent (if not exactly substantial): "Gold my friends, Gold - the time now is to invest!"
And if freeits is right, Brigus might be the place to invest. CAPS member jwebbzor tells us the company has "a ''probable' 1,330,000 ounces of gold" in its new "Black Fox mine." CAPS member admhou thinks the story's even better than that: "Two million ounces of gold reserves and just uncovered a new gold zone they named the 147 zone."
With gold selling for $1,500 an ounce, you'd think the discovery of an extra $3 billion worth of shiny rocks would be enough to get Wall Street's attention (and it has). After all, Brigus itself costs less than a tenth of that. For comparison, at the end of 2010, Yamana Gold (NYSE: AUY ) possessed 22.1 million troy ounces of "proved and probable recoverable " gold reserves -- $33.2 billion worth -- and carries a market cap of $8.8 billion. Goldcorp's (NYSE: GG ) 59.7 million troy ounces should be worth about $89.6 billion, and yield a $40 billion market cap. Why, bulls may ask, should Brigus be worth only a tenth of its reserves when other miners carry market caps that discount their holdings by only a third, and half, or more?
Why indeed?
Well, here's one reason: Both Goldcorp and Yamana are profitable. Brigus is not. Sure, many Brigus backers make much of the fact that the company used to be "hedged" to lower gold prices, but isn't anymore. If gold holds onto its high price, this should be good for Brigus. On the other hand, Brigus's past gold production was hedged at $900 an ounce, which was well above its reported cost of production. Yet Brigus was only profitable in one year out of the last five -- and only just barely even then.
Plus, when you get right down to it, no one held a gun to Brigus's proverbial head, and forced it to hedge on gold prices. Seems to me, that was management's call to make. And when in the business of gold mining, when gold's selling for $1,500 an ounce, it seems to me that competent management should find a way to earn a profit one way or another. Brigus hasn't. And that's why I'm not buying it.
Time to chime in
But perhaps you disagree? If so, here's your chance to set me right about why Brigus is a buy. Click over to Motley Fool CAPS, and sound off.
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