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 Thursday. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
With the Dow now seemingly determined to remain around the 10,000 mark, investors are beginning lose that haunted look in their eyes, returning to the market. On Wall Street in particular, the buyers are finally back, and up above you see four of their favorites.

What do Fools think of Wall Street's shopping list this week? Well, let's see what a few of our very best investors have to say about 'em. Starting with Solarfun, CAPS investor Geofiz calls this company "one of the most efficient solar producers in the business." (And I don't disagree.) Why is this important? To Geofix, it means "they can be expected to reach the crucial price parity sooner than most."

Taking a similarly long view of things, All-Star investor jaketen2001 argues that while DryShips carries debt, the "value (& cost) of debt will decrease (due to inflation), and value of commodities will increase," helping to boost demand for DryShip's shipping of the same.

And regarding Arena, CAPS All-Star dantak points out that the company has a "(s)afe and effective weight loss drug in pipeline." And really, how can you go wrong selling weight loss in America?

Despite the companies' manifold strengths, however, these three stocks still enjoy largely lukewarm support on CAPS. This week, the only company on our list crossing the four-star barrier into "positive sentiment" territory is a little banker by the name of ...

The bull case for Lloyds Banking Group
Er, did I say "little?" Check that. While not enjoying quite the heft of a JPMorgan (NYSE: JPM), Citigroup (NYSE: C), or Bank of America (NYSE: BAC), $69 billion-valued Lloyds is in fact one of the world's larger banks. This despite the fact that its market cap has taken a bit of a pummeling in recent years. For as CAPS All-Star Skyshark29 points out, Lloyds has suffered of late from the twin phenomena of "fears of Greece and the euro." These fears, however, "will subside eventually, and as the bulls return, LYG will be among one of the favorites, IMO."

NKVD1938 agrees, viewing Lloyds as a bet that "almost all of the downside punishment has been baked into these euro banks. Also, despite the 'stress test' being (in my opinion) a lot to do about nothing, look at what the US banking sector did immediately after we published the results of ours."

As does Kvailys: "I think this UK bank has lea(r)ned from the banking crisis the importance of being fiscally prudent and will eventually do very well for investors who get in now."

Russian roulette
Now, NKVD1938 (for those not in the know, NKVD was the Russian precursor to the KGB) suggests we compare Lloyds' prospects to those of the U.S. banks, whose shares plummeted but then soared as the U.S. first plunged into then began wading out of the financial meltdown. So let's do that -- compare Lloyds to the peers named above, using a few standard metrics common in the banking industry:

What we have here, it seems to me, is a banker selling for a lower price relative to earnings than its American cousins, but a generally higher price relative to its book value. To me, that latter fact seems justified, given that Lloyds generates stronger returns on its equity. Meanwhile, according to Capital IQ, a division of Standard & Poor's that does a simply superb job of aggregating the guesses of analysts in the banking sector, Lloyds enjoys all the strong growth prospects posited by our CAPS members -- and more.

In fact, according to Capital IQ, Lloyds is expected to grow its earnings from their present, depressed levels, at something north of a 36% compound annual rate over the next five years. For context, that's multiples better than the single-digit growth rates being projected for JP, B of A, and Citi.

Foolish takeaway
Valued on every metric but book value, Lloyds beats the competition hands down. (And comes close to tying JP Morgan even on book value.) Its growth prospects seem superb, and both Main Street and Wall Street are warming to its prospects.

Sounds like a good bull thesis to me, but ... what do you think? Tell us on Motley Fool CAPS.