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 140,000-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 on the Saturday following close of trading last week. Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Two-way Street
The Dow's plunge back under 10,000 gives once-shy investors a second bite at the apple this week. Should we take it -- or will this fruit just keep falling?

Wall Street evidently thinks the "apples" named above are going to make like superballs and rise from the S&P's ashes -- and they're buying before the bounce. When Fools survey the field, however, we see only one stock with any real elasticity. Its name is Bucyrus. Its game is mining equipment. And it's the subject of this week's column.

The bull case for Bucyrus
CAPS All-Star xiaolifeidao introduced us to Bucyrus late last year as a "coal mining equipment giant [likely] to continue the 20%+ growth for the next decade." Why? How? Explains xiaolifedao: "Coal will continue to be a main electricity energy source in developing countries."

Which countries, you ask? Don't be coy. As secretbonus wrote in October last year: "China's GDP numbers [were not] horrible." (And they still aren't.) Because "China depends on coal ... if coal is in demand, Bucyrus is in demand."

OK. I get it now. Anything else to add? You there. scottcpacma. You wanted to say something? Bucyrus has a "Fast Growth Rate and low p/e ratio."

Wit and wisdom of The Princess Bride
Great. But how fast is "fast," and how low is "low?" If you'll forgive my paraphrasing Inigo Montoya (from The Princess Bride): "I do not think these words mean what scottcpacma thinks they do."

Sure, at a simple level, Bucyrus does appear to have a low P/E ratio. Tally up the last four quarters' worth of earnings; divide this into the market cap, and you get a P/E of 11.7. But this ignores the fact that Bucyrus' actual free cash flow lags its GAAP earnings significantly. Crunching the numbers, I find Bucyrus to have generated only $114 million in free cash over the last year -- a mere fraction of its reported $297 million in profit. Viewed from this perspective, Bucyrus is trading for about 30 times its actual free cash flow.

Oh, and the fast growth rate? I'm afraid that one doesn't stand up to even cursory examination. According to Yahoo! Finance, the consensus of the 16 analysts who follow the company is that Bucyrus will grow about 4% per year over the next five years. Indy 500 material, this stock ain't. (In fact, it's even slower than the predictions for two Bucyrus rivals that I've previously panned -- Caterpillar (NYSE:CAT) and Joy Global (NASDAQ:JOYG).

Now don't get me wrong. I don't disagree with everything my fellow CAPS members have said about Bucyrus. As for the arguments about China, coal, and growth, I agree 100%. In fact, I argued much the same last week when discussing the relative merits of investing in Patriot Coal (NYSE:PCX) versus Peabody Energy (NYSE:BTU).

I just happen to think that Bucyrus is the wrong way to play the right trend. Simple as that.

Time to chime in
But feel free to disagree. If you see something in Bucyrus that I do not -- or if you just want to stick up for the unfairly afflicted Wall Street analysts who are backing the company, then here's your chance. Fool on, and fire away.