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 105,000-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 for the same date. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Main Street seems less than impressed with Wall Street's top picks this week. CAPS players give three of them a bare pass, while actually panning another. There is, however, one company on which the opinions of Wall & Main intersect: They both love fertilizer producer Chemical & Mining Co. of Chile (SQM using its Spanish initials).

The company's products -- potassium nitrate, iodine, and lithium carbonate -- may be as yawn-inducing as its name, but that hasn't prevented the similarly uninspiringly monikered Potash Corp. of Saskatchewan (NYSE:POT) or the slightly more imaginative Mosaic Co. (NYSE:MOS) from riding the agriculture wave to profit. Let's find out why investors see similar prospects south of the border … way south. In Chile.

The bull case for SQM
Ordinarily, I like to use this section of the column to survey a handful of differing viewpoints from CAPS players. Today, I'm going to focus on just one player's opinion. (But don't worry. It's a good one.)

Top-rated pitcher and CAPS All-Star LEGMAKER wrote the book on "Sociedad Quimica y Minera de Chile S.A." -- and I'm exaggerating only a bit. LEGMAKER's pitch stretches to nearly two pages. Single-spaced. It's well worth reading in full, as I think you'll agree from the abridged version here: 

SQM seems to be very well suited in today's [agriculture] environment. They are an $8 billion market cap company that has 49% of their revenues from fertilizer and a 49% market share in that category. They also produce iodine and have a 29% market share while receiving 18% of their revenues from this group. Lastly, they produce lithium and have a 31% market share. 15% of their revenue comes from lithium. 18% of revenue comes from trading derivatives with respect to chemical and fertilizer markets. ...

SQM is a world wide leader and exports its goods to over 100 countries ... This diversification protects them from any regional downturn ... Their fertilizer business is great and the majority of their production. Their iodine is a very steady market that focuses on biocides ... Lastly, lithium ion batteries were developed because they do not have a memory, which means that you can recharge at anytime without worrying about damaging the holding capacity of the battery ...

Their business has seen consistent growth with respect to revenue, over the last five years they have grown at 17% a year. ... Net income is growing at 35% a year.

Valuation check
That's just a small excerpt from a truly great piece of analysis. And truth be told, I'm halfway convinced, except for one thing: valuation. It appears that only three analysts follow this stock, and neither Yahoo! Finance nor Reuters provides any estimate of how fast they think it will grow. But working off of LEGMAKER's estimate of 35% growth (earnings have "only" managed 26% compounded over the last five years), the stock's 61 P/E suggests this one is "priced for perfection."

Now, that may be appropriate. LEGMAKER makes a strong case that SQM operates in the midst of a perfect storm of profit potential. But if anything less than that actually results, this stock could sink right quick.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Chemical & Mining Co. of Chile, 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.