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 165,000-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 after close of trading on Friday. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Up on Wall Street, the pinstripes-and-wingtips crowd are buying these stocks like there's no tomorrow. But down here on Main Street, Fools are busy debating whether they've got a future at all.

Take US Gold Corp for example. All-Star investor DarthMaul09 thinks "these miners will likely benefit greatly from the rise in the gold price and the eventual weakening of the US dollar." But not all Fools are as optimistic about this three-star stock. As fellow Fool Toby Shute pointed out a couple months back, US Gold Corp remains a revenue-less "exploration-stage" company. Gold may be fetching $1,240 an ounce right now, but until US Gold Corp finds something weightier than pipe dreams to sell, it can't cash in.

Speaking of revenue-less companies, have you met Metabolix? It has a plan to sell plastic, fuel, and chemicals not derived from oil -- but so far it's just a plan. The Fool's own TMFBreakerTAllan believes "MBLX may be able to ride public sentiment and corporate relations by selling plastics close to the petrochemical based prices," but sentiment don't pay the electric bill. Unless and until this company starts generating some real revenues, it may remain stuck at five stars.

But fear not, dear Fool. We do have at least one company with brighter prospects on today's list. Allow me to introduce a bird of a more profitable feather ...

Raven Industries
Bull theses abound for this five-star stock, and they're all over the map. Focusing on the company's aerostat and parachute businesses (I presume), WPThatcher endorses Raven because: "War is big business." (And it is. In recent months I've highlighted how aerostat contracts have been flowing to defense contractors from Raytheon (NYSE: RTN) to Lockheed Martin (NYSE: LMT) to Northrop Grumman (NYSE: NOC).)

Meanwhile, nasdaqpicker focuses on management, noting it's been in place "22 years." (Actually, the current CEO has been with Raven for 35 years.) The company is considered "very, very sales oriented. 4 diversifed mfg. divisions complement each other," such that if the war thing should slacken, "Raven would still have the "leading precision ag company in the world."

Finally, valari25 highlights the dividend, pointing out that Raven has a record stretching "20 straight years of raising it and plenty of room to run with it."

Quoth the Raven, "Ever more!"
"Plenty of room?" And how. While Raven's 1.9% dividend may not look like much today, the company only earmarks about a third of its income stream to dividend payments. If it's of a mind to, it can certainly increase that payout -- pretty much any time it likes.

Helping give it flexibility in this matter, of course, is the fact that Raven boasts exceedingly high-quality earnings. Free cash flow found on its cash flow statement back up net profit reported on its income statement. Even better: The company actually generates more cash than it reports as income.

Plucking numbers
Now, this gap between reported income and free cash flow also means that Raven's a bit cheaper than it looks, sporting a price-to-free cash flow ratio of just under 17.6. That's better than the 18.8 P/E ratio, but to my Foolish eye, it still leaves the company looking a bit overpriced relative to long-term growth estimates of 12.5%.

Don't get me wrong -- Raven has been a stellar performer for investors to date, outperforming the market by a good 18 percentage points over the past year. All I'm saying is that the fattest profits have already been plucked here. My advice: Wait for this bird to fly south for the recession. To profit from this bird, you'll need to pay a lower price per pound.

(Of course, that's just my opinion. If you think Wall Street's right to be paying up for Raven, tell us why ... on Motley Fool CAPS.)

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 was recently ranked No. 467 out of more than 165,000 members. The Fool has a disclosure policy.