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:
(out of 5)
American Capital Agency
Great Panther Silver
Companies are selected based on past-3-month changes in institutional ownership, as reported on finviz.com. Recent price provided by Yahoo! Finance.
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 …
- … encouraged by the recent progress report on BioSante's "LibiGel," which suggests a 90% probability the drug will pass muster …
- … betting the Fool's own Isac Simon is right about the long-term attractiveness of natural gas -- and GMX's role in exploiting it …
- … following another Fool's lead on Great Panther Silver, also expected to rebound …
- … but just in case these gas and silver plays fail to play out, they're also locking in big, guaranteed dividends at American Capital Agency.
By and large, Fools appear to agree with these picks. Of the five stocks named above, two of them garner positive four- and five-star ratings on CAPS, while none score any lower than three CAPS stars. The single stock individual investors are most enthusiastic about, however, is five-starred banker Hatteras Financial. Let's find out why, as we examine …
The bull case for Hatteras Financial
CAPS member tomfoolme likes this North Carolinian mortgage REIT for its low P/E ratio, decent price-to-cash flow multiple, and best of all, its "BIG" dividend yield -- currently clocking in at 13.7%.
And All-Star investor SarahGen points out that Tom's not alone: "Recent insider buying after the secondary they just did has me a bit more hopeful on this name."
As well they might. Fellow CAPS All-Star B1ll1am thinks that "as long as interest rates stay low, REITS will be very profitable and pay huge dividends. Interest rates should remain low for at least 2 more years as the Real Estate market is still under pressure."
REIT dividend, right price?
I sure hope he's right, because aside from the dividend, I honestly don't see a whole lot else to recommend Hatteras. While the company's P/E ratio is certainly low enough (just 7.2), it's not that much cheaper than the P/Es at similar REITs such as Annaly Capital
This fact grows in importance when you notice that Hatteras currently has no analysts forecasting its long-term growth rate. Chances are, if Annaly and Capstead are so similar to Hatteras in valuation, their 2% expected annual declines in earnings are also likely the fate that awaits Hatteras investors.
Time to chime in
Still … that 13% dividend yield could go a long way towards alleviating the pain of falling earnings. It's a better yield than Capstead pays, and Hatteras holds the edge of P/E as well. When you get right down to it, I can't say that Wall Street is clearly wrong to be buying this stock.
But what do you think? Tell us on Motley Fool CAPS.
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. 475 out of more than 170,000 members. The Fool has a disclosure policy. The Motley Fool owns shares of Annaly Capital Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.