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 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:

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
Wall Street is buying these stocks hand over fist, and Main Street investors are cheering 'em on. The CAPS community has no compunction about rating these stocks "buys."

Yet this poses yours Fool-ly a bit of a problem. You see, every stock making the list operates either in petroproducts or mining -- two areas in which my expertise is limited. Rather than extrapolate a winner from among these fab five firms, I'll instead discuss a very popular stock that I expect to underperform the market.

But first, a few words from some people who strongly disagree with me:

The bull case for Copano Energy LLC 
In October, Usnzth listed the factors working in Copano's favor: "Independence, good history, must-have product, good management, ...a small cap with plenty of room to grow, and a price beat down below $20." And the downside: "This winter might be a little warmer." (Guess what? It ain't.)

greenwave3 adds a few more items to the plus column: "Nice revenue growth, strong cash flow, trading below [net asset value], increasing dividend. We all need natural gas and these guys are the ones to deliver it (at least if you live in Texas or Oklahoma)."

And taking the big-picture view, DumbAnalist argues: "We will still be using gas, evne if the economy tanks, This company has a great [handle] on the basics of transmission." DumbAnalist has a point.

Running the numbers
As I said before, I'm no oil investing expert, but one big thing does jump out at me from the company's financials. Copano's yield dwarfs payouts at pipeline operators such as El Paso (NYSE:EP) and Williams Companies (NYSE:WMB). Its closest matches come from Spectra Energy (NYSE:SE) and Kinder Morgan (NYSE:KMP), yet even these two are only paying single-digit yields. Copano's paying an incredible 15.9% yield on its stock.

Incredible -- and unsustainable. Copano's monster yield amounts to 142.5% of its net income. As bad as that sounds, the reality is even worse. Over the past 12 months, Copano generated just $22 million in free cash flow, but paid out nearly $97 million in dividends -- 4.4 times its free cash flow for the year.

Alas, Copano doesn't have a cash hoard big enough to afford such generosity; its balance sheet shows more than $680 million in net debt. Based on the numbers I'm seeing, I don't believe Copano can keep this up much longer, and I expect to see the dividend drastically slashed. If and when that happens, I believe Wall Street will regret the eagerness with which it rushed to buy this stock.

Time to chime in
But hey, I could be wrong. Like I said, I don't know a whole lot about this industry, and the company's corporate structure could let it pay apparently unsustainable dividends forever. If you're a wiser Fool than I, here's your chance to set me straight. Click on through and give it your best shot.