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 145,000-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.

Two-way Street
Stock markets stumbled in the waning hours of 2009, with the Dow in particular plunging more than 120 points Thursday. Could this be the fabled "second bite at the apple" for investors who missed out on the rest of the Santa Claus rally? Is now the time to buy in?

Wall Street votes "yeah," believing that the "apples" named above are going to make like superballs -- and they're buying before the bounce. When Fools survey the field, however, we see only one stock with any real elasticity. Smith Micro's the name. Software's the game.

The bull case for Smith Micro Software
As far back as May 2008, CAPS All-Star BstratSeattle was singing Smith Micro's praises and predicting: "stronger wifi market development based on wireless auction and clearwire deal with sprint [NYSE: S]." More recently, zircom confirmed that Fools still believe "this is definitely an industry that is continuing to grow," while within the industry, kab1952 sees Smith Micro making: "Smart moves, innovative, and postioned for growth."

Indeed, Smith Micro has grown -- earnings growth averaged 25% per year over the last half decade, and if you believe Wall Street's forecasts, we can look forward to another half decade, at least, of strong, 22% profits growth in the years ahead. And while critics will contend that even 22% growth cannot justify Smith Micro's nosebleed 59 P/E, its defenders will (or at least should) point out that GAAP "earnings" don't tell the whole story about this stock.

Beyond the "headline number," we find Smith Micro:

• Generating free cash flow three times greater than what it reports as net income (and a price-to-free cash flow ratio of less than 18).
• Boasting nearly $50 million in cash on its balance sheet, with no debt whatsoever.
• Showing continued revenue growth in an economy in which more famous rivals like Cisco (NASDAQ:CSCO) and Microsoft (NASDAQ:MSFT) posted revenue declines in the most recent quarter.

Foolish takeaway
I have to tell you Fools -- I see a lot to like in these numbers. Dare I say it? I do believe Wall Street has finally called one right. (But then again, our CAPS members called it first.)

And now it's time for you to make the call. Does Smith Micro deserve a spot on your buy list? Tell us why.