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, it's easy to keep tabs on the stocks that financial institutions buy and sell. And the 180,000-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:


Recent Price

CAPS Rating (out of 5)

LabCorp (NYSE: LH) $93.10 *****
China Valves Technology (Nasdaq: CVVT) $3.32 *
China Cord Blood (NYSE: CO) $3.55 *
Qihoo 360 Technology (Nasdaq: QIHU) $23.56 * International (Nasdaq: DATE) $13.86 *

Companies are selected based on past-3-month changes in institutional ownership, as reported on 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've been...

  • Making a date with Jiayuan, undeterred by the company's short history as a public company, or its 130 P/E ratio.
  • And logging onto Qihoo, too, despite that stock sporting no P/E at all.
  • At the same time, though, they're seeing value in China Cord Blood, relatively bargain-priced at just 18 times earnings (and growing at 25% per year).
  • And finding China Valves Technology simply too cheap to resist. (And can you blame them? 2.6 times earnings for a ... 35% grower?!)

And if you get the impression Wall Street is laying big bets on China -- you're right. Bankers are swarming over Chinese smallcaps like a pool of piranha, unleashed upon a crate of "Grade D, Fit for Human Consumption" hamburger.

Judging from the uniform single-star ratings these stocks receive on CAPS, however, it appears Fools aren't quite ready to follow Wall Street's mad rush to the Middle Kingdom just yet. Turns out, there's only one stock on this week's buy list that wins applause from professional investors, and individual investors alike:

Let's hear it for Lab Corp
That company goes by the elongated name "Laboratory Corporation of America Holdings" -- "LabCorp" to its friends. And on CAPS, LabCorp has friends aplenty, including Fools like SugarAddict5, who praises the company for its "strong fundamentals, and a growing patient base."

And 94impala, who calls LabCorp the "low cost leader" in clinical testing services. "Check the population/age curve and watch what happens with health-care reform. Testing demand will go up and LH is my pick."

And even CAPS All-Star BrMad, who chooses LabCorp as a means of getting "some exposure to the medical industry in my portfolio. I like the business model. I compared LH to Quest Diagnostics. Quest might have been a little better buy right now. However, one of my Fool services has LH as an active pick. So, I chose it. I'll be able to follow the stock better with the Fool coverage available to me."

Sound reasoning, BrMad. If you're going to pay for a Fool newsletter, you might as well make the most of it. For that matter, make sure to visit the LabCorp discussion board, where Fools are running round-the-clock tests on this company's investability.

The results are in
And what do these test results tell us? Selling for 18.3 times earnings, LabCorp's priced right in line with smaller Bio-Reference Laboratories (Nasdaq: BRLI) -- but it earns a better operating profit margin. It's cheaper than Quest Diagnostics (NYSE: DGX), but it has a higher operating margin than that rival as well.

Best of all, LabCorp is one of those remarkable companies that actually generates more free cash flow than it reports as net income under GAAP accounting standards. In fact, over the last 12 months, LabCorp has generated just shy of $700 million in free cash flow -- 33% ahead of net earnings. As a result, this stock that many people think of as selling for 17.5 times earnings actually costs just 13.3 times the amount of cash it churns out in a year. It's also growing at 12.2% per year. And while that's not a screaming value, it's not a half-bad price for what's essentially one half of a duopoly business in the United States.

Foolish takeaway
In short, there's a lot to recommend LabCorp, especially in comparison to slower growing Quest (with a higher P/E). While I personally would prefer an even lower price before buying in, I can see why Wall Street might want to jump the gun on this one and not risk letting LabCorp's stock price run away from it.

Is that the way you look at LabCorp, or do you have a different opinion of the stock? Click over to Motley Fool CAPS now, and tell us what you think.

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. 610 out of more than 170,000 members. The Fool has a disclosure policy.

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