Stock Madness 2006: Winning With Balance

The following article is part of The Motley Fool's " Stock Madness 2006 ," based loosely on the annual NCAA College Basketball Tournament, a.k.a. "March Madness." Throughout the competition, our writers and analysts will engage in head-to-head competition. You, dear readers, are the fans and referees -- after you read these exciting duels, your votes will determine who moves on to the next round of play. The writer who survives the tournament will be our champion and most valuable "coach."

But please, make no mistake -- " Stock Madness 2006 " is a GAME!

Years ago, I coached basketball. My job as an assistant for a high school girls' team was to help my boss build a winner. It was his system; I was along for the ride.

But I learned a lot, and many of the lessons have stayed with me. Here's one: Balance wins. Or, in investing terms: A balanced portfolio beats both all-value and all-growth. In that sense, my team, an opportunistic squad that couples a pair of long-range shooters with three big guys capable of wiping the boards clean, matches up well with Rick Munarriz's three-point bombers that depend solely on getting, and staying, hot. My lineup consists of Chattem (NASDAQ:CHTT), Embraer (NYSE:ERJ), iRobot (NASDAQ:IRBT), Oracle (NASDAQ:ORCL), and Taiwan Semiconductor (NYSE:TSM). Let's take a closer look at their performance.

Certainly, there's a case to be made for Rick's squad. I've been a contributing analyst to Rule Breakers, and I understand that stocks like CNET can get hot. But so, too, can they go cold, as has former top scorer Baidu. The team suffers when that happens.

Conversely, I build around firms at the center of tectonic shifts in industries that are desperately in need of shaking up. But they needn't be first movers, or small, or even known, as would classic Rule Breakers. All I require is that they have an excellent chance to claim an outsized share of a multibillion-dollar opportunity. Let's focus on my shooting forward for this contest -- Embraer -- to illustrate what I mean.

Embraer is a Brazilian maker of regional jets. Its primary competitor, Bombardier, has gone weak while United Airlines has begun profitable experiments using Embraer jetliners over longer routes. JetBlue (NASDAQ:JBLU) and US Airways are also in on the game, signaling what could be a multibillion-dollar fleet makeover aimed at boosting the bottom line. What's more, the company is valued at less than its peers, including Boeing (NYSE:BA), while sporting better returns on assets and equity.

I take the threat from Rick's shooters seriously. But, in staying behind the arc, I know they're going to miss a lot. My big men won't give them second shots. And on offense, we're going to work the ball inside, spot up for a few threes, and get our dunks in transition while we make Rick's Breakers spread the floor. It's a formula that's worked for decades in college hoops. There's no reason it shouldn't work here, too.

Rick Munarriz's rebuttal
Tim argues that the key to coaching is balance. I'll take my shooters over his team's balance any day. He's got a personality-driven software company in Oracle that has suckered investors into overpaying for vanity acquisitions. He's got a jet maker whose most prolific customer -- JetBlue -- is now in the red.

He also has Chattem, the maker of Aspercreme and Gold Bond medicated powder. If it hurts -- if it itches -- it may be infected like Tim's squad. Aim higher, folks. At the very least, aim for the basket.

JetBlue is a Motley Fool Stock Advisor recommendation. CNET and iRobot are Motley Fool Rule Breakers picks.

Will Tim's team take down Rick's squad? It's your call. Check out Rick's lineup, and then cast your vote .

Fool contributor Tim Beyers owns shares of Oracle. Fool contributor Rick Munarriz owns no shares of companies mentioned in this story. The Motley Fool has a disclosure policy .