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 1b0,000-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:
(out of 5)
|PPL Corporation (NYS: PPL)||$27.80||*****|
|Endeavour Silver (NYS: EXK)||$11.48||***|
|Keryx Biopharmaceuticals (NAS: KERX)||$3.70||***|
|8x8 (NAS: EGHT)||$4.25||****|
|Sangamo Biosciences (NAS: SGMO)||$4.95||***|
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've been ...
- ... reloading on Sangamo Biosciences, in hopes the recent pullback is temporary, and the stock can surpass $8 again ...
- ... betting Endeavour Silver's bounceback has already begun ...
- ... and cheering 8x8's return to grace, as the stock reenters "triple-bagger" territory.
Meanwhile, they're looking for good news out of Keryx Biopharmaceuticals as Phase 3 trials of its perifosine drug progress, and making a contrarian call on PPL Corporation.
Of the five, it's this last pick that looks most interesting. After all, as a provider of electrical power and natural gas to customers in Pennsylvania and Virginia, respectively, you'd think Wall Street would have been shying away from PPL in the run-up to Hurricane Irene's arrival. Instead, Wall Street's bankers have been buying -- and judging from the stock's chart-topping five-star rating on CAPS, they're not the only ones who prefer PPL...
The bull case for PPL Corporation
CAPS member wildbill40 calls PPL "cheap and profitable with a nice dividend and possible synergies from acquisition."
kevinfina describes PPL as "a good growing company."
Meanwhile, ace CAPS investor Chemdawg prefers the adjectives "stable and necessary" to describe PPL, but agrees on the major point: "how can you trust anything that doesnt pay dividends in this environment?"
Fortunately, of course, PPL does pay a dividend -- a fat 5%. And as it turns out, that's not the only thing arguing in its favor. While many investors probably worried that PPL would face severe losses from damage to its infrastructure in the wake of Irene, it turns out those fears may have been overblown. Heading into the weekend, pundits worried that Irene could conceivably inflict as much as $14 billion to $20 billion in damage across the Eastern Seaboard. After the fact, risk-management firm Kinetic Analysis Corp is now guessing total losses will amount to only $7 billion -- nearly two-thirds lower than the worst-case scenario.
That's already turning out to be good news for major property and casualty insurers like Berkshire Hathaway and AIG (NYS: AIG) , up 4% and 8% today, respectively. It's also almost certainly a relief to investors who've been betting on PPL. All else being equal, a storm causing two-thirds less dollar-damage to the U.S. than feared probably inflicted a whole lot less damage on PPL's infrastructure than it could have, as well.
Now ... all that being said, I'm still not convinced PPL is the best place for your money, even if it did escape the brunt of Irene's fury. At 12 times earnings, and paying a 5% dividend, PPL looks slightly more expensive than, say, Duke Energy (NYS: DUK) -- which boasts a similar P/E, pays a higher dividend yield, and to top it all off is expected to grow faster than PPL over the next five years. Still, I'll give Wall Street credit where it's due. They've been betting heavily on PPL getting hit less-hard than feared from hurricane season, and they bet right.
Does that make PPL a good investment in your book? Click over to Motley Fool CAPS and tell us why (or why not).
At the time this article was published Fool contributor Rich Smithdoes not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 417 out of more than 180,000 members.The Motley Fool owns shares of AIG and Berkshire Hathaway.Motley Fool newsletter serviceshave recommended buying shares of Berkshire Hathaway. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has adisclosure policy.
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