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 135,000-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.

Wall Street vs. Main Street
Wall Street traders are snapping up these stocks just as fast as they can hit the "buy" button. Down here on Main Street, though, we're wondering if the "experts" have spent just a bit too much time under the summer sun. Seems they may be hallucinating when envisioning these companies' prospects.

Well, except in one instance. Turns out, both Wall Street and Main Street agree that Drew Industries is a buy. Wonder why? Let's find out.

The bull case for Drew Industries 
As far back as November of '07, nedsully called the trend: "Boomers have to live somewhere and these guys suppy parts to all the major RV and Mobile Home manufacturers. Not sexy but will be very profitable."

Patrick6k expanded on the RV thesis a bit last year, emphasizing how "travel is always at the top of 90 percent of retirees' lists. ... [T]he recreational vehicle segment of Drew Industries is primed for profits. This well run small cap is another company with big reward potential. They have solid management, good inside ownership, and a line of products in growing demand."

More recently, CAPS All-Star investor Wharton93 argues: "As the economy improves, the RV market will pick up. Also (unfortunately for Americans, but good for [Drew]) I think more Americans will be moving toward manufactured houses."

Now, some might argue that the recent run-up in prices at D.R. Horton (NYSE:DHI), Toll Brothers (NYSE:TOL), and Pulte Homes (NYSE:PHM) indicates that conventional houses are on the way back in. But to this I would respond that there's a reason Warren Buffett has been investing in manufactured housing -- and it's not because he has Berkshire Hathaway's (NYSE:BRK-B) money to blow. Americans are tightening their belts, saving more for retirement, and relearning the fine art of penny pinching -- and there's no denying the lower cost of manufactured homes relative to "stick-built" McMansions. Buffett's playing this trend -- and so is Drew.

"But hey!" you object, "isn't Drew unprofitable?" Whatever the trend might be, why should we invest in a company that cannot make money off of it?

And it's true. Over the last four quarters Drew does lack "profit" -- as GAAP defines the term. A $45 million goodwill writedown taken earlier this year has stripped Drew of any meaningful P/E ratio, and left its income statement damp with red ink. But while Drew may lack "accounting profit," what it's got is even better -- cash flow. Over the past 12 months, Drew has generated $34.8 million in free cash flow. As this rate, the company's trading for less than 13 times the amount of cash it generates in a year.

Foolish takeaway
At this price, Drew would be a bargain even if it falls short of the 23% annualized five-year profit growth that analysts project for it. And if it gets anywhere close to achieving that target, it's downright cheap.

But that's just me. It's entirely possible that I'm missing a key point that would make Drew less than buyable. Fortunately, I've got you as a sounding board to set me straight. So what do you say, Fool? Will Drew investors drive away with an RV-load of profits, or become so poor that all they can afford to live in is manufactured housing?

Click on over to Motley Fool CAPS, and tell us what you think.