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 94,000-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:

Wall Street vs. Main Street
Main Street takes one look at Wall Street's fab five this week and wonders aloud: "What are you people thinking?" With just a single exception, every stock on Wall Street's buy list gets roundly panned by the CAPS community. And who might that lucky exception be, you ask? Better sit down for this, because the answer will surely surprise:

It's a Chinese pig farmer and animal feed producer. I really have nothing to follow that. I'm as speechless as you. So without further ado, let's pull on our galoshes and wallow into...

The bull case for AgFeed Industries
rremont introduces us to the company: "Agfeed specializes in the growing hog market in China. By owning both the feed and the pig farms they are in a strong position to take a large hold in the pig industry."

So it seems I was right about the pigs. It appears what we're looking at here is the Smithfield Foods (NYSE: SFD) of China. Some believe, as stated in Pulp Fiction, that: "Pigs are filthy animals. I don't eat filthy animals." But the real question, of course, is should we invest in them?

CAPS All-Star antichrononology advises in the affirmative, responding to Samuel Jackson's Jules with this line from John Travolta's Vincent: "Bacon tastes gooood. Pork chops taste gooood." antichronology reasons, "If [McDonald's (NYSE: MCD)] can sell billions of sub-par hamburgers, then surely there is a market for China Hog Feed stocks."

fusanmao agrees, and provides a remarkable amount of detail about this business in support of his outperform rating early last month:

China Pork market is total diferent from North American Pork market: China-high demand with limited supply, NA low demand with high hog raising cost. ... Pork price will continue go up in China due to inflation.. [AgFeed] will eventually be the market leader for China pork consuming market-1.3 billion people consume pork everyday... Chinese government gives tax free benefit to hog raising companies.

Tax-free profits? You've got to love that. And I find it hard to find fault with fusanmao's reasoning -- I simply lack the China expertise to refute these facts.

Even so, I'd suggest that Fools look carefully where they're stepping when venturing into this stock, lest they put their feet in something unpleasant. For one thing, investing in AgFeed Industries means going it alone. Only one analyst follows the stock, and that lone maverick doesn't provide estimates of future growth. Paying 52 times earnings for an unknown quantity doesn't really appeal to me. And when I see the market valuing AgFeed at $390 million, even though the company generated less than $1 million in free cash flow last year, I'm downright nervous.

Time to chime in
But in the end, the aim of this column isn't just to tell you what I think about AgFeed Industries -- or even what other CAPS players are saying. We really want to hear your thoughts. Click on over to Motley Fool CAPS and tell us what you think.

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