Wall Street's Buy List

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Actions speak louder than words, as the old saying goes. So why do 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:

Company

Recent Price

CAPS Rating

(out of 5)

Embraer (NYS: ERJ) $27.43*****
Samson Oil & Gas (ASE: SSN) $2.26***
Endeavour Silver (NYS: EXK) $10.47***
Zillow (NAS: Z) $28.09*
E-Commerce China Dangdang (NYS: DANG) $6.58*

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. They've been...

  • Betting that Dangdang will imitate Baidu (NAS: BIDU) and blow away estimates when it reports next week.
  • And looking for similar good news in Zillow's second-ever earnings report (due out tomorrow night).
  • They're looking for a continuation of Endeavour Silver's winning streak (up 120% over the past year, and counting).
  • And encouraged by Samson Oil's just-issued report of 18% improvement in oil production. (Samson, by the way, has also turned in a "double" for shareholders this past year.)

For the time being, though, Wall Street is in the minority on these stocks, none of which receives particularly high marks from CAPS members. One stock that both Wall Street and Main Street do agree on, however, is Brazilian plane maker Embraer -- a Wall Street favorite, and a five-star stock on CAPS. What's got investors so excited about this stock? Let's find out, as we examine...

The bull case for Embraer
CAPS member ScottishPete calls Embraer a "major established player in the regional jet business left alone by Boeing (NYS: BA) and Airbus."

Caps member hohdsfiohd likes Embraer for the simple reason that it's "Better than competition on the planes they offer, more fuel efficient, more space, cheaper to run, good support."

As an added bonus, All-Star investor Schmacko points out that Embraer has a military segment. Schmacko likes Embraer's "highly regarded" Super Tucano light attack aircraft, and predicts that "once the KC-390 goes into production it will have strong domestic and international demand as a low cost alternative to many countires aging C-130 fleets. Strategic airlift capability is painfully lacking in many countries around the world participating in NATO and UN peacekeeping missions. I expect over the next decade Embraer could be one of the main companies filling that gap."

Value investors agree: Embraer's a winner
And these few Fools aren't the only ones enamored of Embraer. Why, just last week, Germany's Deutsche Bankrecommended buying the stock. Noting that the company is already scoring better gross profit margins than Boeing and EADS, Deutsche told investors to expect even bigger things in years to come, as Embraer ups its gross margin by as much as 25%, sells "increased volumes" of planes, and grows nearly twice as fast as consensus estimates suggest for the company.

At a valuation of just 11 times earnings today, with 17% long-term growth estimated ahead of it, Embraer looks attractively priced today. And as for tomorrow -- Embraer pays its shareholders a 3.4% dividend, which is more than either Boeing or EADS offer. If investors have to wait a bit for Mr. Market to pay full price for Embraer's value, well, it never hurts to get paid well to wait.

Its prospects notwithstanding, Embraer is still a smallish fish in a big pond dominated by Boeing and Airbus. What do small, government-dependent companies need to survive and thrive? Find out in the Fool's new -- and free! -- report: "Too Small to Fail: 2 Small Caps the Government Won't Let Go Broke."

At the time this article was published Fool contributor Rich Smith owns shares of Embraer. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 315 out of more than 180,000 members.Motley Fool newsletter services have recommended buying shares of Embraer, Baidu, and Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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