Whom Should You Trust: Main Street or Wall Street?

When you're looking to research a stock, whom should you listen to, Wall Street or Main Street? Wall Street has its analysts and they don't have a good track record. They are known to be short-sighted, overoptimistic, and never negative (seriously, when was the last time you saw something with a sell rating?). Savvy investors read their research but ignore their buy and sell ratings. So whom can you trust?

At Motley Fool CAPS, we use the collective opinion of 165,000 investors (Main Street) to inform our stock ratings. Members are scored on their accuracy and overall outperformance of the S&P 500. We then aggregate all the ratings such that members with higher scores have more influence on a stock's CAPS rating. This gives us some of the best ratings around.

Let's look at a few stocks.

Source: Yahoo! Finance; P/B equals price-to-book ratio.

UnitedHealth

Wall Street and Main Street are almost equally bullish on UnitedHealth, the largest health insurer in the U.S., based on revenue. The health-care sector has been beaten down by worries about unintended consequences of health-care reform and the Patient Protection and Affordable Care Act. With a P/E of 8.6, however, the downside is likely more than factored into the stock's price. And there's more to like about UnitedHealth. The company recently raised its dividend from $0.03 annually to $0.50 annually, for a forward yield of 1.7%.

You'd be hard-pressed to find a large-cap stock trading for a lower multiple than UnitedHealth, not including WellPoint (NYSE: WLP). WellPoint, another health insurer, is trading for less than six times earnings. For more reasons why these two are good picks for the long term, check out this video from Fool analyst Bryan White.

NVIDIA

NVIDIA has been hit hard because investors wonder if it will have to pay out hundreds of millions of dollars or more to Rambus (Nasdaq: RMBS), which designs high-speed memory chips, over a patent infringement dispute. It's a real worry, as proven by Samsung. In January, Samsung settled with Rambus for $900 million over older Rambus patents than those in the dispute with NVIDIA. NVIDIA has taken precautions and is sitting on roughly $1.8 billion.

That aside, NVIDIA is interesting enough that people around Fool HQ have been wondering whether it's time to double down on NVIDIA (see the video). It's a dominant company, with more than a 30% market share in the graphics-processing industry, a great brand name, and a founder/CEO heavily invested in the company. What's not to like?

Given Wall Street's perpetual bullishness on virtually every stock out there, you should turn to the completely free CAPS community and harness the wisdom of the crowd to research stocks.