The Wall Street Buy List

"Actions speak louder than words." There's more than a grain of truth to the old chestnut, I'll warrant. But why does the media focus so much attention on what Wall Street says about companies? After all, upgrades and downgrades are mere words, what really matters is how the big boys act.

Luckily for Wall Street watchers, the Internet has made it easy to find this out, too. All we need to do is read MSN Money's list of which companies the institutions are buying. Of course, "Monkey see, monkey do" may not make for the soundest of investment strategies. Even as we view the professionals' words with skepticism, so too, we might want to think twice before blindly imitating their actions.

And yet, there are times when Wall Street is buying, and the smartest investors on Main Street agree. At Motley Fool CAPS, we track the opinions of 65,000-plus lay and professional analysts, then overweight the most successful raters' opinions, arriving at a "CAPS rating" of from one to five stars (five being the best). When opinions on Wall Street and Main Street intersect, that just might be the time to do some buying.

Here then is the latest list version of Wall Street's Buy List, along with a summary of how CAPS investors view the companies:

Wall Street vs. Main Street
For the most part, Main Street agrees with Wall Street this week, giving the majority of the professionals' favorite stocks average marks. And what do they like? In a word: China. Whether it's airlines, biotech, or metals, it seems China is the place to be.

Except when it isn't. As much as everyone likes China, CAPS players like Canada even better. In particular, they like Canadian copper and gold miner Northern Orion Resources, which gets the top, five-star rating on today's list. Let's find out why.

The bull case for Northern Orion Resources
CAPS All-Star Yabapmatt introduces us to the company:

Based in Vancouver, Northern Orion holds a 12.5% interest in the highly profitable Alumbrera copper and gold mine in Argentina. Northern Orion Resources should take in $150 million in cash from this operation this year... That's about one-third of the company's enterprise value of $474 million, if you subtract the $180 million it recently had in cash from its market cap of $654 million. Northern Orion also has a 100% interest in the Agua Rica copper-gold-molybdenum project in Argentina, which is anticipated to start operations in 2010. In the first 10 years of operation, the project could produce 135,000 ounces of gold per year, 365 million pounds of copper per year and 15 million pounds of molybdenum per year, according to a study paid for by the company. "We will be the cheapest producer of any of those three metals if you consider the other two byproducts," says Cohen.

Fellow All-Star Errc02 adds:

Copper is a great investment for the long term. Rapid growth in China and India, combined with a shortage of new supply sources will send copper prices skyrocketing. ... the Agua Rica mine is not priced into the stock. Based on extensive drilling done in the 1990s and early 2000s by NTO and BHP Billiton (NYSE:BHP), it is believed Agua Rica contains ... 45 times more copper and 17 times more gold than Northern Orion's current interest in its Alumbrera mine.

Valuation-wise, FoolforSilver calls Northern Orion "A SCREAMING BUY!!! This stock is very [attractively] valued (PE of 7.8 at this rating). Earnings will accelerate with the new resources being acquired, profits will exponentially expand with the commodities super cycle (gold = going up big)."

Now, it's worth pointing out that FoolforSilver wrote that more than half a year ago. Whenever I see a "dated" comment such as this, quoting a valuation, I like to check on how the numbers might have changed in the interim. Lucky I did, too -- because as of this writing, Northern Orion is selling for a trailing P/E north of 17. It's hard to say whether that's cheap or expensive, though. Only one analyst follows the stock, and he hasn't said how much he expects earnings to grow over the next few years. The fact that the analyst only predicts 8% profits growth next year, though, may not bode so well for the stock.

Time to chime in
Of course, if Northern Orion does manage to "exponentially expand" its profits as per FoolforSilver's prediction, that 17 P/E could well turn out to be a bargain. If you've got an opinion on whether that's likely to happen, drop by CAPS and tell us why.