Wall Street's Buy List

By Rich Smith

"Actions speak louder than words." There's more than a grain of truth to the old chestnut, I'll warrant. But why does 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. 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. View the professionals' words with skepticism and 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. At Motley Fool CAPS, we track the opinions of 65,000-plus lay and professional analysts, then overweight the most successful raters' opinions, arriving at a "CAPS rating" of one to five stars (five being the best). When opinions on Wall Street and Main Street intersect, that just might be the time to do some buying.

Here then is the latest version of Wall Street's Buy List, along with a look at how CAPS investors view the companies:

Wall Street vs. Main Street
For the most part, Main Street agrees with Wall Street this week. And what do they like? In a word: China. Fact is, only two stocks on today's list do not hail from China (and one of those is also based abroad, in Bermuda!).

So which of the five China-based stocks do CAPS players think you should pick from the menu? Hot & spicy Yucheng Technologies, which provides software and IT services to China's flush-with-cash banking sector. And why did 51 out of 53 All-Star investors surveyed like the stock? That's what we aim to find out, as we examine ...

The bull case for Yucheng Technologies

• CAPS player hondo928 aims to get in on the ground floor with Yucheng, noting that the firm's market cap is "just 112 Million." hondo928 doesn't expect the market cap to stay that low for long, and predicts strong growth because, "With all that money in China the banks are going to need help managing it and they can improve efficiency."
• Speaking of Chinese banks, stevosan points out that: "This company has all the top Chinese banks as clients. All the top [C]hinese clients have gone or are going IPO massive at the moment and are loaded with cash. Chinese banks have [less than optimal] internet banking and are just starting telephone banking. How can a company get in with all these fantastic clients??? by having some serious connections in the top government levels. I am living in Shenzhen and some chinese IT friends say this company must have awesome 'GUANXI' ([C]hinese for connections) ..."
• Meanwhile, johnnykillz commends Yucheng as a small cap that "provides e-banking solutions in a country where this is rolling out at hyper speed." He's convinced that Mr. Market has been snoozing. "What's up with these undernoticed Chinese small caps?"

According to Capital IQ, Yucheng currently trades for a whopping 41 times trailing earnings -- which looks a little steep even if the firm does manage to achieve the 34% annual profits growth that analysts project. Now, the forward P/E is a bit lower at 20 times, and if Yucheng is trading for today's price one year from today, I guarantee I'll be interested.

As for today, well, you know what I always say. Fools need to be wary of basing investing decisions on growth that hasn't happened yet. That's the most dangerous kind of growth there is.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Yucheng Technologies. Surely there's someone out there who knows the company better. If you're that someone, come on over to CAPS and tell us all about it.

© 2007 Universal Press Syndicate.