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:


Recent Price

CAPS Rating

(out of 5)

Smith Micro Software (Nasdaq: SMSI) $15.13 *****
Orient Paper (NYSE: ONP) $6.90 ***
iStar Financial $5.68 **
Las Vegas Sands (NYSE: LVS) $51.98 **
Avanir Pharmaceuticals (Nasdaq: AVNR) $4.79 *

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 are five stocks are the greatest things since sliced bread. (And by "bread," I mean money.) But not all of our CAPS members are convinced. Beginning at the bottom, we see Avanir Pharmaceuticals popped as predicted last week on positive FDA data. But with Avanir costing twice as much as it did a week ago, Fools have cut its CAPS rating in half on the premium price tag.

Las Vegas Sands ... yes, they turned a profit in the third quarter. But the company's still carrying more than $10 billion in debt, and racking up more. The money spent on capex last quarter alone was nearly enough to wipe out every red cent in operating cashflow brought in in all of last year. And speaking of debt, iStar Financial pleased investors with plans announced to repay $1 billion of its own debt last month. Still, that will be $1 billion down, and $7.5 billion to go.

On a more positive note, investors are beginning to wonder whether three-star rated Orient Paper might be turning a page. Why? No mystery here -- the stock sells for a P/E of only 6, and the company's somehow managing to earn a plump 13% profit margin from pulp. Yet even this value opportunity pales in investors' eyes, when placed next to the growth prospects at five-star-rated Smith Micro. Let's find out why "growth" trumps "value" this week, as we examine ...

The bull case for Smith Micro Software
It's been nearly three years since CAPS member aprato64 first introduced us to Smith Micro as a company with "no debt, millions in cash [and a] strong relationship with Verizon (NYSE: VZ)." aprato64 predicted back then that "the future of this company [is] the software, particularly StuffIt Wireless."

Fast forward three years, and CAPS All-Star TheBlindCat now calls Smith Micro "a good play on Mobile and Cloud Computing. Explosive growth in both areas and Smith Micro has been in the thick of it from the beginning."

CraigMiles echoes the sentiment with a few bulletpoints: "Increasing Revenue ... Low but Consistent ROIC ... Consistent FCF ... No Debt."

All of which remains true today. Last week, Smith Micro reported third quarter 2010 results headlined by a "record revenue quarter" in which revenues rose 22% to $34 million, and earnings of $0.09 per share. The company boasts a higher gross profit margin than even bigger rivals such as Cisco (Nasdaq: CSCO) and Microsoft (Nasdaq: MSFT), is as debt-free as ever (and in fact, sports $57.5 million worth of cash, equivalents, and short-term investments on its balance sheet.) And with $15.1 million in trailing free cash flow to its credit, the company generates nearly twice as much free cash as its official GAAP earnings numbers suggest. What's not to like?

Glad you asked
Because in fact, I do not like Smith Micro. I do not agree with Wall Street, or with our CAPS community either, that this stock is a "buy."

Why not? Because the valuation here just plain doesn't work. $15 million in trailing free cash flow is an impressive number, yes. But the fact remains that at today's share price, it translates into Smith Micro selling for 34 times annual free cash flow. To me, this seems an excessive price to pay for a company that most folks on Wall Street believe will only grow 16% per year over the next five years. When you notice that the company is in fact currently growing free cash flow at closer to a 10% annual rate -- despite growing revenues 22% last quarter -- the overvaluation grows just that much more apparent.

Time to chime in
To me, this is a simple case of: Good company, lousy stock price. Which is why I saw, if this is the kind of stock Wall Street wants to buy ... they're welcome to it.

But hey -- there's no law that says you have to agree. If you know of a reason why this stock might be worth what it costs, here's your chance to set me straight. Click over to Motley Fool CAPS today, and tell me why I'm wrong.

Motley Fool CAPS: It's fun, it's free ... and it might even make you famous.

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's currently ranked No. 675 out of more than 170,000 members. The Fool has a disclosure policy.

Microsoft is a Motley Fool Inside Value choice. The Fool has written calls (Bull Call Spread) on Cisco Systems. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Microsoft.

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.