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 170,000-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 professionals think these stocks are the greatest things since sliced bread. (And by "bread," I mean money.) Fools, however, are split on their prospects. On the one hand, we see petro-prospector Houston American spiking 260% higher than its price of a year ago, and shake our heads in wonder. I mean, sure, maybe the company's got prospects … but prospects justifying a forward P/E of 1,400? Hmm. No wonder Fools are giving this stock only a single star on our CAPS rating system.
The story's a little better with Quantum Corp, as rumors swirl that EMC
CAPS members are more optimistic on the merger story at Massey. Here we have a bevy of possible suitors; fellow Fool Christopher Barker names Alpha Natural Resources
Jinpan is a small-cap manufacturer of electrical transformers and other power distribution equipment in China, and CAPS member 21popsontop thinks it "is one of several Infrastructure plays that could rock the market this decade."
Why's that? CAPS member medisoft reminds us:
China is growing very strong. It's industry is doing a very good job in growing. This company makes electric equipment that is very used in industry, like transformers, relays and other electrical parts for automated control. The difference between JST and others is the technology inside their transformers, that make them more secure and cooler, also ecologic, because they use some other substance instead of the oil that most of the big transformers have.
Now, I'm as green as the next guy, but just knowing a company is "ecologic" is not enough to make me buy. Fortunately, CAPS member davethewav9 gives us a few more reasons to like Jinpan: "they are one of a few UL certified mfgs ... [and boast] neglible debt ... high returns on capital ... high insider ownership ... high growth potential."
How high is it?
According to the analysts who follow this stock, Jinpan is primed to post 20% annual earnings growth over the next five years. For a stock that sells for less than 12 times trailing earnings, that already sounds like quite a bargain, but it gets better.
Over the past 12 months, Jinpan has actually generated about 18.5% more free cash flow than it reported as net income under GAAP. As a result, the stock that looks like a 12 P/E-er on the surface is actually selling for less than 10 times free cash flow. And again, we're talking about a 20% grower here; a net-debt-free 20% grower, and one that even pays its shareholders a small 1% dividend.
Time to chime in
To me, value prospects don't get much better than this. Of course, investing in China has its risks, and I'm open to hearing contrary views on the stock. If you know something about Jinpan that your fellow Foolish investors ought to know, then here's your chance to share. Click over to Motley Fool CAPS today, and tell me where I'm wrong.
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Jinpan International is a Motley Fool Hidden Gems pick, but 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. 583 out of more than 170,000 members. The Fool has a disclosure policy.
True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.