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?
Once upon a time, we didn't know what the bankers were up to. Now, thanks to the folks at finviz.com, it's easy to keep tabs on the stocks that financial institutions buy and sell. And the 170,000-plus lay and professional investors on Motley Fool CAPS can lend us further insight into whether these decisions make sense.
Here's the latest edition of Wall Street's Buy List, alongside our investors' opinions of the companies involved:
Annaly Capital Management
Northern Oil & Gas
Wall Street vs. Main Street
Up on Wall Street, the professionals think these five stocks are the greatest things since sliced bread:
- They're looking forward to the day Northern Oil turns profitable, perhaps encouraged by last week's update showing Northern with $100 million in cash, and an untapped line of credit for $100 million more.
- They're searching for a bottom at FuelCell Energy. While it's also unprofitable, it appears to have enough cash on hand to fund a couple of years' operations.
- They're encouraged by news that China's Development Bank Corp. has taken a stake in LDK Solar, even as Italy signs on for a new 45-megawatt project with LDK.
- And closer to home, they're taking Jim Cramer's advice to buy Annaly Capital, the company with "the longest term history of returning capital of any REIT."
Judging from the CAPS ratings on these stocks, however, Main Street is not yet convinced that Wall Street's right about any of these four companies. In fact, both Main Street and Wall Street agree on just one stock.
With CAPS' absolute best five-star rating, National Grid is clearly one popular stock -- but why? CAPS member chang07 offers up three good reasons: "yield plus p/e plus demand for power ... electricity that is."
CAPS member akazakoff also likes the firm's "great infrastructure in a business with higher barriers to entry."
And with National Grid facing so little risk of competition to its gas and electric utility business, Clint35 thinks it's essentially a "toll booth type of business," one that customers have no option but to keep paying "with regular recurring revenue."
With a five-year projected growth rate of just 3.4%, National Grid may not break any speed records. But investors rarely seek out utilities for their growth prospects. Rivals Consolidated Edison
Where National Grid really shines, though, is when you compare it to its rivals on other metrics. National Grid's 10-times-earnings price tag, for example, is about half what it will cost you to own Duke, and 30% cheaper than ConEd. Meanwhile, National Grid's 5.8% dividend yield trumps both the 5.3% yield and Duke, and the 4.6% payout at ConEd.
Time to chime in
At $51 and change, National Grid is no long the screaming bargain I declared it to be back in January. (On the other hand, investors who bought the stock back then, and are sitting on a 20% profit, probably aren't complaining.) But it's still better than any of the alternatives, and if you're looking for a steady-Eddy dividend payer to hedge against a market downturn, I'd say National Grid remains a safe bet.
At least, that's my opinion. Got a different read on National Grid? Tell us about it.
The Motley Fool owns shares of Annaly Capital Management. Motley Fool newsletter services have recommended buying shares of National Grid.
Fool contributor Rich Smith does not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 519 out of more than 170,000 members. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.