5 stocks institutional investors are buying

By The Motley Fool

"Actions speak louder than words." There's more than a grain of truth to that old chestnut. But why do the media focus so much attention on what Wall Street says about companies? After all, upgrades and downgrades are mere words. What really matters is how the big boys act.

Luckily for Wall Street watchers, the Internet has made it easy to find this out, too. All we need do is read MSN Money's list of which companies the institutions are buying.

Of course, "Monkey see, monkey do" may not make for the soundest of investment strategies. Even as we view the professionals' words with skepticism, we might also want to think twice before blindly imitating their actions.

And yet there are times when Wall Street is buying and the smartest investors on Main Street agree.

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Over in our CAPS community we track the opinions of 75,000-plus lay and professional analysts, then overweight the most successful raters' opinions, arriving at a "CAPS rating" of between one and five stars (five being the best). When opinions on Wall Street and Main Street intersect, that could signal that it's time to do some buying.

What follows is a list of stocks recently occupying that intersection, followed by a summary of how some CAPS investors view the companies.

Wall Street's buy list

Company	Industry	Market cap	CAPS rating (out of 5)
Millicom International Cellular	Communication services	$12 billion	*****
Suntech Power Holdings	Solar energy	$11.2 billion	****
Aeropostale	Retail apparel	$2.1 billion	***
Answerthink	Management services	$184 million	*
Genitope	Biotechnology	$202 million	*

Only two of Wall Street's top picks from earlier in the month are rated at four stars or better by CAPS investors. Two others on the list are roundly panned.

The five-star stock, Millicom International Cellular (MICC, news, msgs), is well-known in its native Luxembourg. But just 22 of 229 CAPS investors who've rated the stock feel sufficiently comfortable with the company to pen "pitches" about it. Those who have taken the time to explain their thoughts, however, paint us the picture of an attractive play on global growth in cell-phone use.

• Video: 'The Indiana Jones of the cell-phone business'

"CrimsonMan10" observed that "MICC got taken down an inordinate amount during the subprime crisis, and still hasn't recovered completely. Great time to get in." The CAPS player continued: "The company works in countries with low cell-phone penetration and little basic telephone infrastructure. There's nothing but upside in a market like that; the 39% insider holding tells you that, and the RoE (return on equity) is another reason to allow yourself to be convinced."

CAPS player "wbinv2100" agrees. "The third world will use cellular phones over land lines. You're not going to put up telephone wires as fast as you can cell towers. MICC is leading this trend with a dominate position in Central America."

All-Star "kenhannan" finds something to like about Millicon International's business model. "Great cash up front business, delivering cell phones to underdeveloped areas for an up front payment."

These views match my own developing-world experience. In my previous life working in the former Soviet Union, I saw a real bias toward cell phones over landlines, and a preference among the low wage earners for prepaid telecom services over monthly subscriptions.

I'd expect Millicom's prepaid business model in the regions where it operates -- mainly Latin America, Southeast Asia and Africa -- to mimic the success companies like VimpelCom (VIP, news, msgs) and Mobile TeleSystems (MBT, news, msgs) have enjoyed behind the old Iron Curtain.

That said, the valuation doesn't really excite me here. Trading at 18 times trailing earnings (and burning cash to boot), Millicom looks a bit on the expensive side for what analysts predict will be an 8% grower. If developing-world telecoms are your thing, VimpelCom looks more attractive to me, at a price-to-earnings ratio of 28 but with 23% projected growth.

Of course, the aim of this column isn't just to tell you what I think about international telecoms -- or even what other CAPS investors are saying. We also want to hear your thoughts on these or any other companies on today's list. If you've got an opinion, we've got a place to voice it.

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.