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, rather than 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 180,000-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)
UR-Energy (NYS: URG)
Longwei Petroleum Investment (NYS: LPH)
American Superconductor (NAS: AMSC)
China Automotive Systems
Cheniere Energy (NYS: LNG)
Recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS. Companies are selected based on changes in institutional ownership within the past three months, as reported on finviz.com.
Up on Wall Street, the professionals think these stocks are the greatest things since sliced bread. (And by "bread," I mean money.) But are they really the best places for you to put your money?
Sure, at first glance you can see the attractions of a stock like Longwei Petroleum or China Automotive. Both seem to offer low P/E ratios and cash-rich balance sheets. But then again, both are located in China, and the perils of investing in Chinese small caps are well-documented. Little wonder, therefore, that CAPS members continue to rate these stocks at only two stars despite the apparent cheapness.
But what about the other stocks on Wall Street's buy list? Liquefied natural gas exporter Cheniere Energy, ultra-efficient electric wire maker American Superconductor, and uranium miner UR-Energy -- seems there's significant interest in alternative energy brewing up on the Street. Yet once again, the CAPS community has its reservations. With no profits on which to base a valuation for either American Super or Cheniere, it seems Foolish investors just don't want to take the risk.
As for the stock at the top of this week's list, UR-Energy, it isn't profitable, either, yet it scores a full complement of five CAPS stars. Does it deserve them?
The bull case for UR-Energy
All-Star CAPS investor rfaramir thinks so, because even after the well-publicized Fukushima Daiichi debacle, the world still needs energy, and "Uranium will be needed again."
If you agree with this thesis, RockyMountainMan has two ideas for you: "If you want the big boy go Cameco but when the tide rises it will lift all the players." (Including, presumably, micro-cap miner UR-Energy.)
According to johndoe31, UR has secured "most" of the permits it needs to begin mining uranium in Wyoming. "Mining will begin this yr 2011,the price of uranium could continue higher since ,i believe world demand will be strong."
Sound good so far? I suppose it does, and this is probably why Wall Street is buying into UR-Energy. There are, however, a few problems with the buy thesis -- chief among them the fact that it's now 2012, not 2011, and so far UR still hasn't begun mining any actual uranium. In a recent press release, the company boasted that its Lost Creek property in Wyoming has 45% more "measured and indicated" uranium than it previously thought. But as of yet, it's all still in the ground (if not just in management's imagination), and for the time being UR is still stuck "completing mine planning and permitting activities to bring its Lost Creek Wyoming uranium deposit into production."
There are two ways to interpret this. Looking forward, investors can hope that Wall Street is right about UR's potential and invest in hopes the company will soon capitalize upon this potential. More skeptical investors, however, will note that UR has had potential for quite a long time already, yet so far it's done nothing but lose money and burn cash ($13.6 million just last year).
The two views aren't necessarily exclusive. Still, it seems to me that the prudent course here -- even if you believe in UR's potential -- is to await some proof that it can actually deliver before committing your money.
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At the time thisarticle was published Fool contributorRich 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. 356 out of more than 180,000 members. The Fool has adisclosure policy.Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.