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 130,000-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.

We love Chinese jewelry
Wall Street just can't wait to own these stocks, while Main Street investors ... can. Commodities may be all the rage again up in New York City, but out here in the real world, the run-up in metals and oil prices has us a little nervous (not quite as scared as we are of Vanda, apparently, but nervous nonetheless).

That said, there is at least one Wall Street stock tip that we really like. Let's pick up our jewelry loupes now, and find out what has given Foolish investors such a serious case of Chinese gold fever about the little stock with the funny name. Let's examine ...

The bull case for Fuqi International
CAPS member dbillett1 introduced us to this stock last summer:

Based in Shenzhen, China, Fuqi International is a leading designer of high quality precious metal jewelry in China. They develop, promote, and sell a broad range of products in the rapidly expanding Chinese luxury goods market. ... Fuqi now has a total of 47 store counters and 6 retail store outlets. Their goal is to acquire or open 60 to 80 store counters, and 8 to 10 retail stores.

So, Tiffany (NYSE:TIF) it's not… or at least not yet. But that doesn't keep CAPS All-Star neumann101 from predicting: "Explosive growth in China's domestic gold jewelry market will drive profits for this corporation." Looking out even further than dbillet1 dared, neumann101 tells us that Fuqi "plans to add 150-200 retail outlets ... in the next 2-3 years. ... They also plan to add diamond and gemstone jewelry to production capability at the Shenzhen factory in 2009, it may already be producing."

In sum, fellow All-Star chk999 exclaims: "China and gold. Two, two great tastes that go great together!"

However, after chewing over Fuqi's cash-flow statement a bit, I have to say that I experienced a bit of an unpleasant aftertaste. Why? Because while it's true that Fuqi's minuscule 8 P/E ratio entices me, it's also true that the "E" in that equation looks a bit inflated. Fact is, actual free cash backs up just half of Fuqi's reported "net earnings;" such free cash flow amounted to just $15.4 million over the past 12 months, compared to $31.1 million in GAAP earnings.

Still, if the company manages to achieve anything near the growth rates that Wall Street expects out of it, the price still looks awfully nice. The Street's predicting faster earnings growth at Fuqi than even high-profile China play SINA (NASDAQ:SINA) will boast, and nearly as much as Baidu (NASDAQ:BIDU). Consensus estimates right now posit 21% earnings growth next year, accelerating to the breakneck pace of 31% per year over the next five years. With a P/E in the single digits, and an enterprise value-to-free cash flow ratio sitting around 13, that should make for one very profitable half-decade for investors.

Foolish takeaway
Of course, that's just my opinion (and, well, the opinion of nearly 200 CAPS investors who agree with me). But there's no law that says that you have to tag along.

Far from it. Truth be told, I'd much rather hear from a few investors out there who can knock some holes in this bull thesis. A story that looks as good as this one is often too good to be true -- so here's your chance to tell us what we're missing. Click on over to Motley Fool CAPS, and make your case.