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 125,000-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:

Company

Recent Price

CAPS Rating
(5 Max)

Steel Dynamics  (NASDAQ:STLD)

$10.36

****

DryShips (NASDAQ:DRYS)

$9.96

**

ProLogis  (NYSE:PLD)

$9.16

**

Prudential Financial  (NYSE:PRU)

$26.35

**

CIT Group (NYSE:CIT)

$4.18

*

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.

Wall Street vs. Main Street
Main Street investors look at Wall Street's fab five this week, and we don't know whether to laugh or cry. Four of the five stocks get below-average two- or one-star ratings on CAPS, and the sole recipient of a superior four-star rating is ... a commodities play.

Yet if you have to play the commodities game, you could do far worse than by starting with Steel Dynamics. The company is arguably the best-respected shop second to Nucor (NYSE:NUE) -- and plenty of people would argue that it doesn't need to concede that slot. Why is that? We're about to find out as we delve into...

The bull case for Steel Dynamics

We lead off with a pitch from CAPS All-Star trexmoney who believes, "Steel related products should do well in the Obama reconstruction play."

And according to Colt45M6, Steel Dynamics is one of the best companies within this steel sector. Why? Because SD manufactures steel not with blast furnaces, but with "Mini-mills," which are "more efficient" and involve "leaner infrastructure, just in time delivery, low overhead." Colt continues: "[Steel Dynamics'] business model will be followed by all of the major metal companies if they want to survive against the cheaper imported products from Mexico and China."

One of the great things about CAPS is that with 125,000-plus investors, we're bound to have a few contributors who can offer firsthand experience with the companies they recommend. So for our final pitch of the day, we turn to jdmet, who told us back in May of '07:

[A] local company to me. I have met the management and they know how to run a business. They take good care of their employees and the favor is returned through production. I have owned stock for about 10 year and it has done nothing but make me money. Started small and continue to buy or build other plants. This rising US steel company will definately give competitiors a run for their money.

Fools, I've been watching the steel sector with interest ever since I had the pleasure of discussiong steel with former Novamerican Steel President Scott Jones back in 2006. I bought in, and I'm still waiting for steel to reemerge into favor, today.

That said, when the turnaround comes, I'm not sure that Steel Dynamics is the absolute best stock to own if you want to capitalize on it. Sure, at 3.2 times trailing earnings, Steel Dynamics is cheap. But it's not dirt-cheap -- long-term projected earnings growth here is only 5%. Better plays, to my Foolish eye, include:

  • Nucor, of course. It's more profitable than Steel Dynamics, and it has better growth prospects.
  • Also ArcelorMittal (NYSE:MT), which boasts superior scale of operations, a lower price-to-earnings ratio, and higher profit margins.

Time to chime in
Incidentally, investors give Nucor the Foolish CAPS five-star treatment and place ArcelorMittal on par with Steel Dynamics at four stars. But that's before you cast your vote, Fool. Think we have the ratings mixed up? Then come on over to Motley Fool CAPS and cast your vote for the strongest steelmaker of all.

Motley Fool CAPS : It's fun, it's free, and it just might make you famous.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Rich Smith owns no shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 895 out of more than 125,000 members. The Fool has a disclosure policy.