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?

Once upon a time, we didn't know what the bankers were up to. Now, thanks to the folks at finviz.com, it's easy to keep tabs on the stocks that financial institutions buy and sell. And the 170,000-plus lay and professional investors on Motley Fool CAPS can lend us further insight into whether these decisions make sense.

Here's the latest edition of Wall Street's Buy List, alongside our investors' opinions of the companies involved:

Companies are selected based on past-three-month changes in institutional ownership, as reported on finviz.com. 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.) They're …

• Hunting for hypergrowth oil profits at Magnum Hunter.
• Hopping the mo-mo train at YM BioSciences.
• Thinking Chinese chipmaker Spreadtrum will keep making great leaps forward.
• And guessing that Longwei Petroleum still has a long way to run.

Perhaps Wall Street's most interesting move, though -- and judging from its four-star rating, the clear favorite among CAPS investors this week -- is its sudden interest in Seagate. As you may recall, Seagate made headlines earlier this month, when it responded to the Western Digital (NYSE: WDC) / Hitachi tie-up by buying parts of Samsung's hard-disk-drive business for itself. In so doing, Seagate essentially completed the transition of the global HDD business into a duopoly composed of itself and Western-D.

And now it's capitalizing on that move. One week ago, Seagate introduced a mobile storage device for memory-challenged Apple (Nasdaq: AAPL) devices. Essentially a wireless external hard drive for iPhones, iPads, and iPods, the "GoFlex Satellite" is a play on Apple's penchant for selling devices with limited and non-upgradable memory. Wall Street seems to like the idea. Now, let's find out what CAPS members think.

The bull case for Seagate Technology
Satellite grabbed the headlines last week, but to true Fools, it's only tangential to the larger Seagate story. CAPS All-Star BudandMolly, for example, believes that "SEDs (self-encrypting drives) are the next big thing in physical security of data." Our CAPS member continues: "The government and businesses that need to protect data will rapidly move toward this method vice security software alone. Seagate is expanding rapidly in this area and has many of its drives government certified."

CAPS member IronSulfide highlights the stock's "2% Div. and a low P/E" and predicts that Seagate "is a survivor." And wward35634 agrees that these factors make the stock look "deeply undervalued."

"Deeply" undervalued? I wouldn't go that far. On the surface, yes, Seagate looks cheap at 10.5 times earnings, and with growth predicted at 11% per year for the next five years. But I prefer the valuation on Seagate's archrival, Western Digital.

Consider: As good as Seagate's GAAP earnings look, its cash-flow statement struggles to back up the story. Free cash flow for the past 12 months comes to only $319 million, or less than half of reported net income. In contrast, Western-D boasts free cash flow of $761 million -- better than 91% of reported profits. It also has a stronger balance sheet than Seagate, with $2.9 billion net cash as of the last report.

Time to chime in
For these reasons, I think Western Digital is a better bet than Seagate -- but that's just my opinion. What's yours? Tell us on Motley Fool CAPS.