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 120,000-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. Main Street loves (most of) 'em too, and -- well, who are we to disagree? I can't help noting that today's list is jam-packed with Motley Fool-recommended stocks -- Illumina and Healthways from Stock Advisor and Mindray Medical from Rule Breakers.

How to choose between 'em? Mindray's cheapest, so let's start there, with a few words from the CAPS hotshots who spotlighted this pick for us.

The bull case for Mindray Medical
I'll have CAPS All-Star mkyorai introduce us to the company: "Mindray prodicues medical equipment in China (manufacturing, development, sale) for life support, in vitro, medical imagng." Despite some concerns about inventory buildup, mkyorai thinks Mindray has "Enormous growth potential" and "Consistent cash flow."

FoolSolo adds that: "The world needs cheaper health care, and that makes China an attractive place to manufacture those very expesive medical devices."  But how cheap is "cheaper?" As CAPS All-Star GorillaGorilla informed us last year:

Mindray's heart monitors and the like [sell] at a price point that no other manufacture can match-typically half. R&D and manufacturing are all in China-no one can match the margins. China health market should increase at 50% per annum for the next 5 years and the international market is barely penetrated.

Unmatched margins with 50% annual growth might sound a bit too good to be true -- but the facts largely bear it out. Running the numbers against a few of Mindray's larger competitors, I found that Mindray's operating profit margin of 25% dwarfs Abbott Labs' (NYSE:ABT) 19%. General Electric (NYSE:GE) no longer reports results for a separate health-care division, but back when it did (last year), GE Health care was earning only an 18% margin on its business. And Philips (NYSE:PHG) Healthcare? Those poor guys can't even break out of the single digits. In each case, therefore, Mindray trumps the competition handily.

Growthwise, analysts are looking for nearly 34% annual growth out of Mindray -- while that's not quite 50%, it's still pretty impressive. Plus last year the firm generated 80% growth. What's more, this is profitable growth. In 2007, Mindray generated some $47 million in free cash flow from its business. Based on the preliminary report for 2008 results issued  last month, I'm guesstimating that the firm may have upped that to as much as $85 million in cash profits in 2008.

Foolish takeaway
If I am right (the preliminary nature of January's report makes that a big "if"), we're looking at a stock valued at 30 times annual free cash flow, estimated to grow earnings at 34% long-term -- and so far, beating that estimate with a stick. In that case, Mindray Medical looks pretty darn attractive to me at today's prices.

But that's just my opinion. Feel free to disagree. Whether you're of a mind to buy Mindray, or short the heck out of the stock, CAPS offers you a forum to lay out your thesis and learn whether your fellow investors think it holds water. Give us a shout.