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 135,000-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 and CAPS ratings provided by Motley Fool CAPS.

Today's chart leads us to the whimsical question: Is Wall Street binging on drugs? Because this week we find them shopping for X, Y, and Z Pharma, chased down with a glass of "BioTherapeutics" (a druggy sounding name if ever I heard one.)

CAPS members perusing the list agree that Momenta, at least, is a good trip (as do we -- Motley Fool Rule Breakers has even recommended the stock). But it's Chinese staffing firm 51job that really puts a smile on our face. Here's why.

The bull case for 51job Inc.
The Fool's own TMFHoosier8 introduced us to the firm last summer:

51Job provides an HR recruiting service in an ever expanding China. ... The company claims to be the leading recruiting company in China as observed by its large database and the high volume of page views. ... As an added bonus, CEO Rick Yan owns 57% of shares outstanding, often a good sign.

CAPS All-Star fibreoptik sagely opines: "Those of us that don't dip our toes into the Asian end of the pool very soon are surely going to miss out on some great opportunities." (And true to form, he recommended this stock before many knew of it -- way back in 2006.)

Fellow All-Star JUMPKIS was a little slower out of the gate, but his pitch (penned in 2007) was worth the wait, adding this insight:

[51job] runs a print business. What a lot of people forget is that the vast majority of Chinese do not have access to the Internet. [51job's] does print job adverts, especially in growing rural areas. Focus is on converting the paper customers to more lucrative online forms, which should boost profitability in the future.

Thanks for the tip, JUMPKIS. We'll be sure to keep that in mind.

Another thing investors should keep in mind: This is a Chinese company. While that means good things to some people (growth investors, for example), it also means that nailing down the numbers on this company is going to be tricky.

While net income isn't too hard to figure out ... and while we in fact know that 51jobs earned $9.3 million over the last 12 months, free cash flow data will generally only get updated once a year. Last year, for example, the firm generated $14 million in free cash flow, versus $11.2 million reported "earnings." My best guess, therefore, is that trailing free cash flow could be about $11.6 million.

What that means
What that means is that, first and foremost, you cannot trust Yahoo! Finance's data on the company. According to the ever-popular website, 51jobs is currently unprofitable -- which couldn't be farther from the truth. In fact, the firm's selling for about a 34 P/E, and about 27 times free cash flow.

These numbers continue to make 51jobs sound expensive ... except for the fact that, again, you cannot trust Yahoo!. The website tells us that 51jobs has neither cash nor debt, but that's only half true (the good half.) In fact, 51jobs has no debt, but $159 million in cash -- more than half its own market cap. Net that out of the equation, and the business here is selling for much more attractive multiples. Attractive enough that the stock just might be worth owning if analysts are correct in their predictions of 15% long-term profits growth.

Time to chime in
What's more, consider that growth prediction for a moment. If New Oriental Education (NYSE:EDU) and Sohu.com (NASDAQ:SOHU) are growing in the 20s, and Baidu (NASDAQ:BIDU) and China Fire & Security (NASDAQ:CFSG) in the 30s, is there any reason to expect that the "leading recruiting company in China" will only manage 15% growth? Off of a piddling $110 million revenue base? Seems a mite conservative to me. If I'm right -- and if our CAPS members are right -- 51jobs could prove to be considerably cheaper than the above numbers suggest.

But hey, that's just my opinion. What's yours?