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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 94,000-plus lay and professional investors on MSN CAPS agree with Wall Street's opinions, it just might be time for some buying.
- MSN Stock Challenge: Join CAPS, rate stocks, win prizes
As wisdom-of-the-crowd experiments show, collective estimates are often superior to the estimates of most individuals. The ratings and comments from the CAPS community aren't always right, but there's value in a system that incorporates the knowledge, information and skills of thousands of participants.
Let's look at a handful of companies that recently made Wall Street's buy list, and weigh those decisions against the collective judgment of CAPS investors.
One glance at Wall Street's recent fab five and Main Street wonders aloud: "What are you people thinking?" With a single exception, each of these stocks on Wall Street's buy list gets roundly panned by the CAPS community.
And who might that lucky exception be, you ask? Better sit down for this, because the answer will surely surprise:
It's a Chinese pig farmer and animal feed producer. I really have nothing to follow that. I'm as speechless as you.
| Company | Sector | 52-week high | 52-week low | CAPS rating (out of 5) |
|---|---|---|---|---|
Hogs | $16.36 | $4.60 | **** | |
Business equipment | $54.50 | $23.07 | ** | |
Specialty apparel stores | $13.86 | $1.48 | ** | |
Memory chips | $26.41 | $12.05 | ** | |
Health-care plans | $5.37 | $2.31 | ** |
So without further ado, let's pull on our galoshes and wallow into the bullish case for AgFeed Industries (FEED, news, msgs).
Caps player "rremont" introduces us to the company: "Agfeed specializes in the growing hog market in China. By owning both the feed and the pig farms they are in a strong position to take a large hold in the pig industry."
So it seems I was right about the pigs. It appears what we're looking at here is the Smithfield Foods (SFD, news, msgs) of China. Some believe, as stated in "Pulp Fiction," that: "Pigs are filthy animals. I don't eat filthy animals." But the real question, of course, is should we invest in them?
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CAPS player "fusanmao" agrees, and provides detail about this business in support of his "outperform rating" on the stock.
"(The) China pork market is totally different from the North American pork market. China -- high demand with limited supply. North America –- low demand with high hog-raising costs. . . . Pork prices will continue to go up in China due to inflation, (and) AgFeed will eventually be the market leader," fusanmao wrote. The CAPS player also likes the tax advantages conferred on the company by the Chinese government.
Tax-free profits? You've got to love that. And I find it hard to find fault with fusanmao's reasoning. Even so, readers should look carefully where they're stepping when venturing into this stock, lest they put their feet in something unpleasant.
Stock Chart (Year)
AgFeed Industries
And paying 48 times earnings for an unknown quantity doesn't really appeal to me. When I see the market valuing AgFeed at $360 million, even though the company generated less than $1 million in free cash flow last year, I'm downright nervous.
But in the end, the aim of this column isn't just to tell you what I think about AgFeed Industries -- or even what other CAPS players are saying. We really want to hear your thoughts. Click on over to MSN CAPS and tell us what you think. It's fun, it's free and it just might make you famous.
This article was reported and written by Rich Smith for The Motley Fool. At the time of publication, he owned none of the stocks mentioned.
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