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 145,000-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.

Jobless recovery? What jobless recovery? Hey, the Dow's still over 10,000, and the Wall Streeters are partying like it's ... 2007. Should you join them?

Survey says: No
Facts are stubborn things, and it's a fact as plain as the nose on your face that Fools disagree with Wall Street this week. I mean, get a load of the kinds of companies Wall Street is buying this week! Airlines? Auto parts makers? All we need now is a steel mill to complete the trifecta of troubled industries. Little wonder that four out of the five companies making the list this week score one and two stars in CAPS investors' estimation.

But then there's that rare fifth company that puts the rest of 'em to shame.

The bull case for Medical Action Industries
Congress is just getting around to acting on medical industry reform this week, but here in Fool-dom, investors have been gunning for this sector for years. As far back as June 2008, CAPS All-Star PebbledShore introduced us to Medical Action Industries as a maker of "medicine cups, bedpans, tumblers, pitchers and carafes, denture cups, urinals, sitz baths, service trays."

I know, I know … bedpans. Sexy. But as CAPS member glenvar reminded us then, all of these items are "disposable medical use products. The beauty is that they have to be purchased and replaced."

Can you say "dependable, recurring revenues?" According to another of our All-Star investors, boiseidfool, Medical Action "is projected by Value Line to double earnings in the next five years, has actually doubled earnings in the past five years, is selling at price-earnings multiples (P/Es) that are 110 percent or less of Value Line's projected earnings growth rate, and has a safety rating of average or better."

Sounds pretty good to me. And while the stock may look pricey at an above-market multiple of 28 times earnings, if you dig a little deeper I suspect you'll find it's bargain-priced. Medical Action's cash flow statement shows the company generating $21 million in free cash flow over the last 12 reported months -- more than twice the earnings it reported under GAAP accounting standards. Based on these cash earnings, Medical Action looks downright cheap at just 12.7 times free cash flow -- and with 18% projected annual growth over the next five years.

Foolish takeaway
Is the stock a sure thing? Heck, no. For one thing, Medical Action faces tough competition from much bigger players in the medical equipment market -- Becton, Dickinson (NYSE:BDX) and Covidien (NYSE:COV), to name a couple.

These competitors aren't just bigger than Medical Action; they also get to spread out their costs over much broader revenue streams, and accordingly, earn much fatter profit margins, putting Medical Action at a decided disadvantage. On the other hand, there's always the chance that a bigger rival will see opportunity in Medical Action's tiny profit margins and move to scoop up its revenue streams at a discount, improve margins, and profit from the acquisition.

Time to chime in
So which way do you expect this scenario to play out? Will Medical Action shares zoom on news of a takeover? Will the company remain independent, and pluckily take on the giants of industry to defend its market share? Or will it get crushed like a bug?

CAPS reports, but you decide. Click over to the site now and sound off!