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 provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Institutional investors can't get enough of these stocks, but take a moment to look over just what it is they're buying: Two cash-burning biotechs, a housing stock and an airline. And they call us Fools? (Well, OK. We call ourselves Fools, too.)

Of the five, it seems CAPS members think only Century Aluminum stands a snowball's chance in Texas of producing a profit. Let's find out why.

The bull case for Century Aluminum 
Attracted by Century's "dramatic decline in ... value over the past 2 years," mccarthyconsultg noticed in February that: "One important competitor of CENX operating in Central America (Jamaica) has closed its operations and may not reopen for another 12 to 18 months. The Central American closure will reduce the supply of alumina on the global market and should contribute to an increase in demand for CENX's products."

But Century isn't standing idly by and waiting for rivals to save its business. As CAPS All-Star pradsynair recently pointed out: 

CENX has temporarily closed down a few of its mines to reduce costs. I am sure they will be able to quickly open them up to meet increased demand once the economy rebounds. The levels are already at historic lows.

Fellow All-Star freestate80 also thinks that:

Aluminum prices are going up which should help eps for this company. Glencore, a private equity firm, owns 49% of the company and can take it private mid-2010. I am not sure if that will happen but it should guarantee a nice bump from this price. Even if this does not happen, the company should perform well as the economy improves. Small cap ... can provide more price upside than say Alcoa (NYSE:AA).

Ah, but will it provide that upside? I'm afraid I must disagree with both Wall Street and my fellow Fools on this question. I think Century's going down.

Oh, I'll admit that Century isn't as bad an investment as Alcoa. freestate80 is right about that much. Whereas Alcoa sells for nearly its book value, Century's shares fetch just 80% of book. Century also has the stronger balance sheet, with less than $200 million net debt versus Alcoa's $9.4 billion.

So yes, the stock has the potential to outperform Alcoa. But what has it done with all that potential? Century spent most of the last decade losing money, averaging nearly $100 million in cash burned over each of the last 10 years. Nor were these years all mired in recession. That decade included plenty of years in which heavy industrialists like Boeing (NYSE:BA) and Ford (NYSE:F) produced healthy demand for aluminum in their planes and automobiles.

Yet Century hasn't generated one red cent of positive free cash flow since 2004, and it's burned through nearly $1 billion over just the last 12 months. Given that analysts expect no profits from Century either this year or next, I wouldn't be at all surprised to see the company just keep on burning cash.

Time to chime in
But that's just me. And the point of this column isn't just to tell you what I think about Century Aluminum, or even what other CAPS members are saying. What we really want to know is whether you think Century's days are numbered?

If you've got an opinion, we've got a place to state your case: Motley Fool CAPS.