"Actions speak louder than words." It's an old saying, with more than a grain of truth to it. So why is it that when the Wall Street firms merely "initiate coverage" or "upgrade" their ratings on a company, it gets all the news coverage? After all, those are only words; what really matters is how the big boys act. Luckily for Wall Street watchers, finding out which professionals put their money where their corporate mouthpieces are has become relatively easy in this Internet age of ours. All we have to do is read MSN Money's list of which companies the Street is most actively buying.
But once we've done that, what next? After all, "Monkey see, monkey do" may not make for the soundest of investment strategies. That's where Motley Fool CAPS can help. The Fool's newest venture into the realm of collective intelligence collects ratings from 18,000 lay and professional analysts, then overweights the most successful raters' opinions to come up with a "CAPS rating" from one to five stars (five being the best). If Wall Street's buying and the smartest investors in Fooldom say they're right to do so, then that should get your attention.
And so, let's meet today's list of contenders:
|
30-day price increase |
Currently fetching |
CAPS rating | |
|---|---|---|---|
|
GTX (NASDAQ:GTXI) |
30% |
$18.22 |
* |
|
Mamma.com (NASDAQ:MAMA) |
266% |
$6.09 |
* |
|
Syntroleum (NASDAQ:SYNM) |
39% |
$4.00 |
* |
|
Redback Networks (NASDAQ:RBAK) |
56% |
$25.21 |
** |
|
Electronic Clearing House (NASDAQ:ECHO) |
41% |
$18.31 |
***** |
Poultry and offspring
Another well-worn saw asks us: Which came first, the chicken or the egg? As you've noticed by now, one characteristic that each of these stocks has in common is that they've experienced dramatic price increases over the last 30 days. But are the Wall Streeters buying because the stocks have gone up -- playing the momentum game -- or is their heavy buying causing the prices to spike? It could even be a combination of the two, a vicious circle of some buyers pushing the price up and others hopping aboard the bandwagon and enjoying the ride.
Don't get plucked, or scrambled
I can't help but notice one other characteristic these companies share: Precious few of them enjoy much support among CAPS raters. With the exception of Electronic Clearing House, which is being gobbled up by Intuit (NASDAQ:INTU) as dessert to its previous meal, Digital Insight (NASDAQ:DGIN), CAPS investors think every other company on this list will underperform the market.
Choosing which of today's one-star pariahs to spotlight is as easy as paraphrasing the classic question: "Why do Fools hate their Mamma.com?"
- wangman, one of our All-Star players, sums up the bear case here with a single pithy sentence: "hype, hype, hype, oh, where's the profits?"
- EnochRoot , who ranks in the top 1% of CAPS investors, goes the analogy route, noting that Mamma.com is: "trading at 13.8X EV/S. Coincidentally, GOOG is trading at 13.7X EV/S ... but I think those GOOG sales are a little more profitable ..." Yes, a little.
Are they right to be throwing Mamma.com from the train, or is this stock cooking with gas? Tell us what you think on Motley Fool CAPS. You see, on CAPS, it doesn't matter whether your name has a "TMF" in front of it, or a "CFA" after it. Unlike Wall Street, we welcome all comments on CAPS, where the best arguments -- and the best records -- carry the day.
Intuit was a former Motley Fool Inside Value pick . Discover all of Fool value guru Philip Durell's current picks with a free 30-day trial subscription.
Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 44 out of more than 18,000 raters.
