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 115,000-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. CAPS ratings from Motley Fool CAPS.

Do you see what I see?
I bet you do. Seems Wall Street has had a change of heart about the American consumer and is betting big on retail this week. Of the five stocks making our list, only one doesn't cater directly to Americans' propensity to consume, consume, consume. And even that one, AmeriCredit, supports sales at Ford (NYSE:F), GM (NYSE:GM), Toyota (NYSE:TM) -- essentially any automaker you can name -- by making credit available to car buyers.

But for all the faith Wall Street shows in consumers, the consumers themselves -- as represented by the 115,000-plus individual investors who make up CAPS -- takes a decidedly jaundiced view of most of these companies. In fact, there's only one shop on the list we like: "action sports" retailer and Motley Fool Hidden Gems recommendation Zumiez.

The bull case for Zumiez
One of the great things about CAPS is that with 115,000 investors and counting, we're bound to have a few contributors who can offer firsthand experience with the companies they recommend. Today, we'll draw our CAPS member comments exclusively from this crowd of brand aficionados, beginning with ...

• CAPS newcomer jwalsh71, who introduced us to this company back in May: "Zumiez is a growing teen retailer that is just beginning the second third of their estimated organic domestic growth expectation to 800 stores (they now are just shy of 300 stores). And, this concept could do well overseas as well. Same store sales are beating expectations-still positive in this tough economic environment. Financially, the company looks stable, with no long term debt. Plus, Zumiez carries one of my favorite brands, [Volcom (NASDAQ:VLCM)], which has been screaming lately also."
• MITB also knows and loves the company, writing back in April: "Main reason I picked this stock is because it a great clothing/accessories store I shop at. Other than that [Zumiez] reported ... earnings of $0.42 per share on 3/13/08. This beat the $0.38 consensus of the 11 analysts covering the company and I recent news, Zumiez director Barnum buys 54,937 shares of stock." (By the way, in even more recent news, Zumiez beat earnings in Q1 and Q2 2008 as well.)
• And we'll wind up with a few words from CAPS All-Star Hetepheres, who wrote in July: "My grandson (12) was visiting and I tried to show him a little about the market. He suggested Zumiez and I looked it up for him. My daughter, (his mother) confirmed brand loyalty in the family so for him I bought some because Financials look okay and I want him to have something to follow that he is interested in."

So growth prospects, check. Brand loyalty, check. But what's this about the financials looking just "okay"? That sounds a little underwhelming. 

Fortunately, it's also a little understated. Fact is, Zumiez's financials look downright enticing right now. The company sports a 21 P/E -- a bit rich at first glance, but entirely justifiable if the company lives up to analyst expectations of 20%-plus profits growth over the long term.

What's more, the P/E alone doesn't do Zumiez full justice. Despite its store buildout program, Zumiez generates more free cash flow than it reports net income under GAAP. The price-to-free cash flow ratio on this one comes to just under 20 -- and that's not even considering the more than $64 million in net cash on the balance sheet. Net that out, and Zumiez carries an enterprise value-to-FCF ratio of just 16 -- a bargain in light of its fast growth rate.

All things considered, while I wouldn't necessarily say Zumiez is "dirt cheap" just yet, there's no question that it's bargain-priced.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Zumiez -- or even what other CAPS members 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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