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 170,000-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 after close of trading on Friday. 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.) The pros are:
- Hopping the momentum train at digital security specialist Wave Systems, up 160% so far this year.
- Backing Deutsche Bank's "buy" recommendation on Ciena.
- Betting that Acme Packet will continue delivering.
- Piling into MannKind postcrash, hoping the FDA will revive the stock by approving inhaled insulin drug Afrezza.
The MannKind theory may have the best chance of working out. After all, the FDA did approve Pfizer's
What's the attraction in this Internet advertising company with a $100 million market cap? I can sum it up in one word: Groupon. Earlier this month, Google
Admittedly, Local.com is a whole lot smaller than Groupon. But according to CAPS member dmontieth, it's quality that matters: Local.com "has made consistent improvements in earnings, sales and subscribers. It's also won numerous awards by their industry," wrote this member.
CAPS member shashanksoni was pretty sure that if Groupon went Google, and Amazon.com shacks up with LivingSocial, then ultimately Local.com would be acquired by Yahoo!. On the other hand, Fools have been predicting a Local.com buyout for years, suggesting acquirers including Yahoo, Google, and Microsoft.
And yet ... what if it doesn't get bought up? Relying on a buyout to salvage an ill-considered investment is pretty (small-f) foolish, after all. Before following in Wall Street's footsteps and buying in hopes a greater (small-f) fool will come along, it's worth asking whether Local.com is worth owning all on its lonesome.
It may well be. Although the company's temporarily too tiny to attract much official Wall Street coverage, and lacks sufficient analyst attention to give us a good idea of its long-term growth prospects, the stock's price certainly doesn't seem unreasonable at just 21.5 times trailing earnings (and only seven times next year's expected earnings). Local.com's price-to-sales valuation -- a mere 1.3-times ratio -- looks similarly cheap relative to valuations ranging from three to six times as large at Google and Yahoo!
Call me crazy, but I actually think Local.com looks attractive as both a buyout candidate and a stand-alone investment. Either way you look at it, I think Wall Street's finally calling one right.
Of course, that's just my opinion. Feel free to disagree. In fact, pull up a soapbox on Motley Fool CAPS, and tell me why I'm wrong.
Fool contributor Rich Smith owns shares of Google. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 606 out of more than 170,000 members. The Fool has a disclosure policy.
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