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 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 five stocks are the greatest things since sliced bread. (And by "bread," I mean money.) They're ...

• ... gushing over Gushan, and the prospects for biodiesel in China.
• ... ignoring recent cautions from FBR Capital, and grabbing all the Patriot Coal they can carry.
• ... piling back into Paramount in the wake of its sell-off.
• ... glomming onto Gramercy, a REIT which inexplicably spiked to the top of the list of biggest percentage-point gainers Friday.

And wouldn't you know it? It turns out most investors down here on Main Street agree -- all four of these stocks rate four stars on CAPS. But only one of the stocks on today's list wins that elusive fifth CAPS star, which is why it's graphics processing superstar NVIDIA that attracts our interest today.

The bull case for NVIDIA
What's got NVIDIA topping charts and attracting praise from investors? According to CAPS member JDAR5715, the answer is pretty simple: We're seeing "graphics in tablets, PC's, everywhere." CAPS member cal920c argues the company will "out perform once they release a FERMI dual GPU card, not to mention all the momentum behind the Tegra 2 and ION2 platforms coming out soon."

Indeed, as the Fool's own TMFJoker argues, already NVIDIA's "Tegra2 mobile chip set is a hit and will be a significant revenue source as it starts powering more smart phones and tablets. Their PC/Laptop graphics products are popular albeit under pressure from cheaper [Intel (Nasdaq: INTC) and AMD (NYSE: AMD)]-based solutions."

And yet, therein lies the rub. You see, not all Fools are equally enthused about NVIDIA. While I personally worry most about the stock's price (NVIDIA sells for 64 times earnings and doesn't even generate as much free cash flow as it claims to be earning in profits under GAAP), my fellow Fool Anders Bylund laid out the bear case for NVIDIA's prospects last week.

According to Anders, it's not NVIDIA per se we need to worry about; it's those competitors that TMFJoker named. Specifically, AMD and its Radeon 5670 graphics chip, which "runs modern games faster than the closest NVIDIA equivalent," and at a sub-$100 price point presents a rival product against which NVIDIA will struggle to "match the cost, features, or anything else."

Foolish final thought
Simply put, Anders argues that AMD is setting up to "kill" NVIDIA. Now, when you combine this threat with the clear overvaluation of NVIDIA shares themselves (I mean, how much sense does it make to be paying 64 times earnings for 14% annual growth?), I'm honestly at a loss to explain why NVIDIA still enjoys so much support on Wall Street, and such high ratings from CAPS members.

But hey, I'm willing to be convinced. If you have a theory why NVIDIA is worth such a high price, here's your chance to state your case. Click over to Motley Fool CAPS right now, and tell me why I'm wrong.