Wall Street's Wish List

"Actions speak louder than words."

It's an old saying, with more than a grain of truth to it, I'll warrant. So why is it that when the Wall Street firms merely "initiate coverage" or "upgrade" their ratings on a company, that gets all the news coverage? After all, those are only words when what really matters is how the big boys act.

Luckily for Wall Street watchers, finding out which professionals put their money where their corporate mouthpieces are has become relatively easy in this Internet age of ours. All we have to do is read MSN Money's list of which companies the Street is most actively buying.

But once we've done that, what next? After all, "Monkey see, monkey do" may not make for the soundest of investment strategies. That's where Motley Fool CAPS can help. The Fool's newest venture into the realm of collective intelligence collects ratings from over 23,000 lay and professional analysts, then overweights the most successful raters' opinions to come up with a "CAPS rating" from one to five stars (five being the best). If Wall Street's buying and the smartest investors in Fooldom say they're right to do so, then that should get your attention.

Now, let's meet today's list of contenders:

Houston, we have a disconnect
What's up with Wall Street this week? With the exception of specialty metals maker Brush Engineered, which meets with grudging acceptance on CAPS, Wall Street's favorite stocks get panned one and all by our 23,000-odd investors. Not one gets more than a single star. Could CAPS be telling us that far from jumping on the investment banks' bandwagon, we should be taking their buying frenzy as an opportunity to sell out?

Old friends
Perhaps. Perhaps not. Either way, it's not what I want to talk about this week. Rather, I want to highlight three of this week's one-stars, which we've seen 'round these parts before: Fieldstone, Medis, and Onyx. Attentive Fool.com readers will recognize Fieldstone as having appeared in the Dec. 11 edition of "Get Ready for the Bounce," a column in which I examine the stocks that have fallen the most in the past month, searching for rebounds in the making.

Think the 44% rise in value, noted above, looks pretty good? Think again. When I highlighted Fieldstone back in December, the stock was actually trading $0.09 higher than it is today. Just goes to show that while any knife can bounce, if you grab too soon, it can cut you pretty deeply while you wait for its rebound.

Medis is a similar story. Profiled in the Dec. 5 edition of our seasonal "Contrarian Christmas List" for being one of the most-sold stocks by institutional investors that month, it's since rebounded and is up 42% over the last 30 days. The bad news: It, too, is trading lower today than when we profiled it in "Contrarian." And then there's Onyx.

Selling for just $10.58 when it appeared in the Jan. 3 edition of "Contrarian," Onyx had just about reached its bottom after reporting disappointing results in a melanoma study. Since then, it's rocketed a startling 162% in under two months, with most of those gains coming on a single day. On Feb. 12, Onyx and partner Bayer (NYSE:BAY) announced strong results for its drug Nexavar when used to treat liver cancer.

How much do you want to bet that the same Wall Street wizards who panned the stock in December after Nexavar produced disappointing results in a melanoma trial enjoyed the run-up in price on Feb. 12? Pretty slim, I'd say. However, not everyone was fooled. Some investors saw through the stock's one-star rating to the potential for profits that our own Brian Lawler alluded to in his column "Slight Setback for Onyx" (in December) and confirmed in "Rock-Solid News From Onyx" (in February). For example:

• perrnat007 observed that Nexavar: "has already been approved to treat other types of cancers and should add significant revenues for ONXX in 2007."
• And CAPS all-star Jeffreyw observed that: "Great strides are being made in cancer research and treatment. Can explode with successful new therapies or be acquired for a premium price."

Explosion accomplished. And thanks to Motley Fool CAPS, I'm betting that more than one Foolish investor profited from Onyx, while Wall Street was looking the other way. Speaking of which, if you see something that Wall Street is (or we are) missing in the other stocks listed above, don't be shy -- come on over to CAPS and tell us about it. Working together, we'll beat the Street yet.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 68 out of more than 23,000 raters.