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 135,000-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.

Wall Street vs. Main Street
Wall Street professionals think these stocks will go far, but Main Street investors are adopting a wait-and-see attitude on most of them -- three stars. No more.

But with green shoots allegedly sprouting hither and yon, not everyone wants to wait around ... and perhaps miss the boat on a rising economy. If the economy truly is recovering, then one of the first places we should see improvement is in the temporary employment sector -- HR's kiddie pool, where companies can test the waters on new hires, without having to take the full plunge. And so it is that our CAPS community gives its highest marks to Spherion. Here's why:

The bull case for Spherion
NetscribeBusServ introduced us to Spherion in early 2007 as a provider of "temporary staffing services, managed services and permanent placement services in the US and Canada. Temporary staffing services include personnel in clerical, light industrial, information technology, finance and accounting, legal, engineering, sales and marketing and other sectors. ... Within permanent placement, the company's employees locate talent on behalf of clients, screen the candidates and assist in the recruitment efforts." Customers range from such heavy industrials as Honeywell (NYSE:HON) to tech shops such as Cisco (NASDAQ:CSCO).

CAPS All-Star noptov52 argued in May: "With companies wary of making long term hires in an uncertain market, they may turn to temp agencies to fill needs in the interim." And longer-term? Back in late 2006, mapodell made the big-picture argument that over time "[s]taffing companies will help meet the needs of companies as baby boomers retire."

Granted, the recent market crash may make retirement look like a pipe dream to many. Nests have been robbed of their eggs, and our national budget crisis is pushing Social Security ever closer to the cliff. In such a scenario, future "retirees" could seek part-time employment with Spherion to supplement their post-"retirement" incomes.

The theories on how Spherion can profit in any business environment are many. Yet the question remains: Why is Wall Street buying up shares of a company that is expected to earn so little next year that its forward P/E ratio is in the triple digits?

And the answer: Because the P/E ratio doesn't tell the whole tale. Sure, Spherion has lost money over the last year -- as GAAP calculates such things. After recording a $150 million goodwill impairment in last year's fourth quarter, it has posted losses of almost $127 million in the four quarters ended in March. Yet in the same time Spherion was racking up these "accounting" losses, it managed to generate more than $75 million in free cash flow.

Which means that this cash-profitable enterprise is trading for less than four times the amount of cash it earns in a year. Even at Wall Street's conservative prediction of 6% five-year annualized growth, that makes Spherion a bargain in my book.

Time to chime in
Of course, the purpose of this column isn't just to tell you what I think about Spherion, or even what other CAPS members have written about it. What we really want to know is what you think about the company.

If you've got an opinion, we've got a place to state your case. Motley Fool CAPS.