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 145,000-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)
Pioneer Drilling  (NYSE: PDC  )	$9.69	*****
Crosstex Energy  (Nasdaq: XTXI  )	$7.60	***
Patriot Coal (NYSE: PCX  )	$19.11	****
Clean Energy Fuels  (Nasdaq: CLNE  )	$19.06	***
STEC	$18.25	***

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.

It took a while in coming, but with the S&P now up nearly 3% since the year began, the Santa Claus rally seems in full effect -- and for good reason. Ford's (NYSE: F  ) reporting boffo sales, the nation's retailers turn out to have a not-bad-at-all holiday season, and according to Mosaic (NYSE: MOS  ) (and Goldman Sachs (NYSE: GS  ) , its cheerleader-in-chief), all's well, as well, in the world of fertilizer.

So if the global economy is back on track, that means it's time to start snapping up energy stocks, right? In Wall Street's opinion, at least, that's precisely what it means. Four of the Street's top five buys this week hail from the energy sector. And wouldn't you know it -- one of 'em is also a Fool fave.

The bull case for Pioneer Drilling
Why are CAPS members adding Pioneer to their wagon train? All-Star investor RaginSteve put his finger on one reason just over a year ago: "nat gas supply excesses are short-term, or illusory." And not just nat-gas. lonewulf47638 recently pointed out that in addition to lighter stuff: "new oil is needed and so are drillers."

You can probably guess what comes next -- CAPS All-Star FiatFaux pointing out that, hey, "Pioneer has the Drilling Rigs to Fuel Domestic Consumption!"

Q.E.D.?
It sure looks like a logical progression to me. We need more gas (or shall real soon.) Oil, too. And to get at both, we need to drill, baby, drill. Enter Pioneer, with its ... hmm ... $210 million in net debt, total lack of anything resembling a GAAP profit (or even a prospect for earning one next year.) Is this really the right way to play rising demand for hydrocarbons in a reviving economy?

Perhaps. While I admit to a lack of enthusiasm over the firm's debt load and profitless income statement, further examination reveals that things may not be as bad as first appears. For example, the cash flow statement shows us that even as Pioneer disclaims any "accounting profit" earned over the past year, it generated some $56 million in actual free cash flow from its business.

On the other hand, Pioneer's success on the free cash front hasn't gone unnoticed by investors. While the stock only recently showed up on Wall Street's radar screen, more prescient investors have been bidding up Pioneer for quite some time, with the result that the stock has more than doubled the S&P's performance over the past year.

Personally, I find the valuation here, at the tail end of that run-up, a bit steep. With an enterprise value of more than $730 million, investors are valuing Pioneer at 13 times the amount of cash it can churn out in a year. That would be OK for a faster grower, but with most analysts predicting Pioneer will grow at only 9% per year for the next half-decade, my feeling is that the stock has gotten a bit ahead of itself -- and that Wall Street's coming late to this party.

Time to chime in
But like I said, that's just my opinion. You are certainly free to disagree -- and in fact, if you do, we'd love to hear why. Pull up a chair here on Motley Fool CAPS, and tell us all about it.