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:


Recent Price

CAPS Rating

(5 max):

Federal-Mogul Corp. (NASDAQ:FDML)



Akamai Technologies  (NASDAQ:AKAM)



Minefinders Corp. (NYSE:MFN)



Arena Pharmaceuticals (NASDAQ:ARNA)



Sprint Nextel  (NYSE:S)



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 has been buying these stocks hand over fist, and Main Street investors agree -- at least three of these stocks look like mighty fine buys. Of the three, two are no surprise. Akamai, a Motley Fool Rule Breakers recommendation, just turned in a whopper of an earnings quarter. And Minefinders? Well, with gold topping $1,000 an ounce, it's only to be expected that anything related to the business of digging up shiny rocks would do well. But what's up with Federal-Mogul?

Sure, corporate monikers don't get much cooler than "Federal-Mogul." That's just genius branding. But once you look past the name, and tune into what the firm actually does ... I mean, for goodness’ sake, people, it's an auto parts manufacturer! Is there any reason to think this is anything other than a miserable business to be in?

Let's find out.

The bull case for Federal-Mogul Corp.
Reviewing the data compiled by CAPS on the company, initial indications look good. So far, we've got just one skeptic betting on Federal-Mogul's fall. Everyone else -- including all five CAPS All-Stars who've taken a look -- likes what they see:

  • lonewulf47638 tells us: "Bailout will help as [GM (NYSE:GM)] will suceed." (Federal-Mogul sells auto parts to GM, Ford (NYSE:F), and Daimler.)
  • All-Star CAPS investor chundarr agrees that this "$25 gigabuck bailout will help... a little."

And sadly, that's about all we've got on Federal-Mogul to-date. Two short pitches, both of which basically boil down to two words: "Bailout bet."

So here's my problem with that thesis: The bailout is not likely to work, at least not next week or next month. No sooner did Congress pony up $17 billion to Chrysler and GM, than they turned around and asked for more. In a rare moment of candor, GM even admitted that in the worst case, it could cost some $100 billion to fix what ails it. 

Now, maybe that figure will shock Congress into action, get it to open up its purse and shake loose some change. Me, I think it is just as likely that GM's admission will convince the Feds that these companies are unsalvageable -- and that we should cut our losses.

Perhaps you're willing to take the buy-side of that bet on Federal-Mogul. But before you do, consider this. Although Federal-Mogul purports to have earned more than $1.4 billion in the 12 months ending September 2008, in fact, these "profits" came in the form of such unusual GAAP categories as "gains on settlement of liabilities subject to compromise" and "fresh start reporting adjustments." These line items are the sole reason the stock has any "profit" whatsoever to report.

Simply put, the stock's 0.5 price-to-earnings ratio is an illusion. Meanwhile, this firm hasn't earned a penny's worth of free cash flow since 2005. At the same time that it was reporting $1.4 billion in profit last year, Federal-Mogul actually turned in negative free cash flow to the tune of $57 million.

Time to chime in
Personally, these numbers scare the heck out of me. Although the Great Financial Crisis of '08 has presented Foolish investors with numerous opportunities to profit -- this isn't one of them. I wouldn't invest in Federal-Mogul even if its key customers were in the peak of financial health, much less teetering on the edge of bankruptcy.

But hey, Foolish minds can differ. Click on over to CAPS, and tell us what you think.

Sprint Nextel is a Motley Fool Inside Value pick. Akamai Technologies is a Rule Breakers recommendation. Try either investing service free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 558 out of more than 125,000 members. The Fool has a disclosure policy.