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 120,000-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 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.

With most stocks on the list falling short of even the mediocre three-star rating that VMware boasts, it would appear that CAPS members are less than impressed with Wall Street's faves this week -- or most of them, at least. One stock everyone seems to like, though, is Hexcel, thanks in large part (I suspect) to Hexcel customer Boeing (NYSE:BA) having finally resolved its union troubles last week.  

Why do I suspect this? Well, just listen to what our CAPS members were saying about Hexcel's prospects pre-strike-resolution:

The bull case for Hexcel

• We'll start off with a brief introduction to the company, courtesy of shoreham, who tells us that: "This company makes fibers that wil be in demand as aircraft are replaced with lighter and more fuel efficient models. [Hexcel] already has been awarded contracts so this pullback is an opportunity for the future."
• Commenting last summer, BenStyles wrote: "[Hexcel] should directly benefit from the increasing use of composites among planmakers and other vehicle makers seeking efficiencies through lighter weight." (In addition to Boeing, such aeronautical giants as Embraer (NYSE:ERJ), Lockheed Martin (NYSE:LMT), and Airbus use Hexcel's composites.)
• And speaking to the point at hand, mikethejoker made this prediction in September: "The Boeing strike is a downdraft for the near-term, but ... [a]erospace bookings are strong and should provide a nice tailwind for a few years while the wind energy market ramps-up." Moreover, mikethejoker sees the chance for even greater sales to the likes of Ford (NYSE:F) and GM (NYSE:GM) as: "Light-weight, strong materials are only going and find more applications (e.g. auto) in coming years..."

Now, combine the good Boeing news, the prospects for accelerating sales into new markets, and you can see why analysts expect to see Hexcel grow its profits at better than a 21%-per-year clip over the next half decade. You can also see why Fools might be excited over the chance to own that kind of growth for a mere 13 P/E.

But here's what you may not see -- or at least, not right away. Hexcel looks awfully cheap from a basic P/E perspective, but when you look a little deeper, you'll notice that the company is not currently generating any free cash flow whatsoever. Nor was it before the Boeing strike. Nor has it (on an annual basis) since 2005.

Foolish takeaway
Personally, I prefer companies that generate heaps o' cash over those that just report accounting profits. Hexcel's got plenty of the latter, but none of the former, and for this reason I don't expect to be following Wall Street's lead anytime soon.

But Foolish minds can certainly differ. If you see Hexcel differently, here's your chance to tell us why. Click on over to Motley Fool CAPS and sound off now.

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