"Actions speak louder than words."

It's an old saying, with more than a grain of truth to it, I'll warrant. So why is it that when the Wall Street firms merely "initiate coverage" or "upgrade" their ratings on a company, that gets all the news coverage? After all, those are only words, when 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 more than 60,000 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:

Currently Fetching

CAPS Rating

American Software  (NASDAQ:AMSWA)

$9.97

*****

XOMA (NASDAQ:XOMA)

$3.10

***

Silicom  (NASDAQ:SILC)

$24.72

***

Lifeway Foods  (NASDAQ:LWAY)

$16.10

***

CF Industries  (NYSE:CF)

$62.87

***

S1 (NASDAQ:SONE)

$8.26

***

Pre-Paid Legal  (NYSE:PPD)

$53.50

**

Companies are selected from the "Institutional Ownership Up Last Month" list published on MSN Money on the Saturday following close of trading last week. Price increase and current pricing also provided by MSN Money on the same date. CAPS ratings from Motley Fool CAPS.

Wall Street vs. Main Street
Main Street looks at Wall Street's buy list this week, and shrugs. The majority of the stocks making this week's list get no more than so-so three-star ratings, with only one viewed more favorably than average. Which of these two comes out on top?

On top this time is patriotically named "America Software," which makes -- you guessed it -- enterprise management and supply chain software in America (Atlanta, to be precise). With 287 ratings to its name -- 285 of which are positive -- CAPS players clearly expect this one to outperform. Why is that? Let's find out, as we review ...

The bull case for American Software

  • CAPS All-Star NetscribeSoftwre introduces us to the company: "American Software ... supports a portfolio of software and services that deliver enterprise management and collaborative supply chain solutions. ... The company primarily serves consumer goods, retail & apparel, and wholesale & distribution companies. ... The company's valuation seems reasonable considering its growth potential and strong balance sheet. It's a zero debt company which churns out free cash flows and doles out regular dividend. Its dividend yield of more than 4% plus also makes it an attractive stock. Hence the stock is likely to outperform in the medium term."
  • "Over $2.5 a share in cash and a 4.5% dividend. How can you beat that in a growing business?" asks knudfool.
  • To which dietvanillacoke replies, "AMSWA owns 88% of LGTY, which is about 11.3M shares. Unless my math or understanding are wrong, that means each share of AMSWA 'owns' about .45 shares of LGTY. If LGTY is trading at $9.50, that makes each share of AMSWA contain about $4.275 of LGTY plus $2.818 of cash. At $9.00 per share, that means you are getting the whole rest of AMSWA at $9.000-$4.275-$2.818 = $1.907. Doesn't sound like a bad deal to me!"

Sounds good so far. But the "pitches" recited above date as far back as October 2006 -- so let's double-check a few of the figures and make sure they remain accurate. On the plus side, we see that American Software's cash per share has increased to better than $2.86 per share, and Logility is trading for $11.49 per share (making American Software's per-share claim on the company worth about $10.11). Thus, the argument could be made that American Software shares are today worth nearly $13 per stub, even if the company's own business is worthless.

On the minus side, American Software's shares now yield only 3.6%. So if it's dividends you're after, the company doesn't look as attractive today as it did a year ago. But if intrinsic value is your thing -- Motley Fool Inside Value members, listen up -- this company looks really, really interesting.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about American Software -- or even what the other CAPS players are saying. We also want to hear your thoughts on the company. Is this story just too good to be true?

Tell us what you think on Motley Fool CAPS.

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 No. 433 out of more than 65,000 rated players. The Fool has a disclosure policy.