In June, BusinessWeek did something really unusual: It published a list of the smartest superheroes. It was a timely story, too. Just this week Superman made a celluloid reappearance, providing hope to Time Warner (NYSE:TWX) shareholders everywhere.

While I have my doubts that the Man of Steel will create box office gold, or that BusinessWeek's profile will suddenly create legions of adult comic fans, these loosely related events sent my investing brain into overdrive. I wondered: Which would make the best investor?

Meet the world's finest
Certainly not Superman. He's endowed with extraordinary powers by being in the right place: earth. But Batman, the other half of the superhero team DC Comics calls the world's finest, is an otherwise normal human who has trained himself to peak mental and physical condition. He's also been dubbed "the world's greatest detective" for his sleuthing skills. (Which makes it no surprise that Batman is still the star of DC's Detective Comics, in which he first appeared in 1939.)

So while there's much to be said for Superman's style and raw ability, I believe Batman would make for the greater Fool (I mean that in the nicest possible way).

Invest like Batman
In the comics, Batman solves crimes using a combination of tools: computer and surveillance equipment, disguise, stealth, and, of course, intimidation. As an investor, the Dark Knight would make use of a different set of tools, but with a similar aim: to solve the riddle of whether a stock is poised for generous returns.

If you've read much of what we cover here you know that there are several keys to understanding whether a stock is cheap. Here's a checklist:

  • A competitive advantage.
  • A superior management team.
  • A cheap valuation.

Let's examine Motley Fool Stock Advisor selection Electronic Arts (NASDAQ:ERTS) using some of the same tools Batman might.

Competitive advantage: When assessing competitive advantage, I usually turn to the section on risks in the most recent annual report. (You can find EA's latest report here.) I typically focus on the first four risk factors. For EA, that's:

  1. Dependence on third-party gaming platforms, which requires expert planning.
  2. The cyclicality of the video game business.
  3. Declining prices for titles aimed at new platforms such as Microsoft's Xbox 360.
  4. Declining prices for titles aimed at existing platforms.

All of these sound really bad. And at least one has me questioning whether there's anything more to EA's competitive advantage than its brand name -- and even that may be eroding with no big-name successes for the game maker outside of its sports franchise. (Indeed, the company's recent deal for massive multiplayer gaming firm Mythic Entertainment bears witness to an internal lack of innovation outside of sports-themed games.)

What's more, according to the 10-K, the company's investments to support forthcoming platforms from Sony (NYSE:SNE) and Nintendo will increase costs, and those costs won't be offset because of declining prices on games for existing platforms and an expected ramp-up period for games on new platforms.

Superior management team: There's a lot to like to about CEO Larry Probst. He's been with EA since 1984 and has been chairman and CEO since 2004. He's also owns roughly 1.2% of the outstanding shares of the company (including options conferring the right to acquire shares), which makes him the largest individual shareholder, according to the most recent proxy. Both are good signs.

Cheap valuation: It gets harder here. A check of the key statistics at Yahoo! Finance shows EA trading for 56 times trailing earnings. Meanwhile, analysts expect the gamer to grow the bottom line by an average of 19% over the next five years. That's high growth, to be sure. But is it worth a multiple of 56 times earnings? Color me skeptical.

But like most good detectives, Batman isn't prone to studying cases from just one angle. And we shouldn't, either. Video games, after all, constitute a high-growth market. PricewaterhouseCoopers recently projected that the global market for video games will increase to $46 billion in 2010, up from $27 billion at the end of 2005. That's enough to get started with a back-of-the-napkin valuation.

Or is it? While EA has 10% of the market today, according to the latest sales figures, its underlying business is notoriously cyclical. R&D could pay off huge, or not at all -- which makes any sort of forward-looking multiple tantamount to arm-waving.

And that can mean either huge risk or huge reward. It's also exactly the kind of uncertainty that the Dark Knight attempts to avoid, or exploit, in his sleuthing. No wonder he's been on the job for 67 years!

No tights, but ...
I've met Tom and David Gardner several times. Neither strikes me as anything like the Man of Steel or the Caped Crusader. Nevertheless, both have proved to be outstanding detectives when it comes to stocks. And their Stock Advisor recommendations prove it. On average, their picks are beating the market by 41 percentage points since inception in April 2002. You're invited to find out how they do it, free, by clicking here for a 30-day trial.

Fool contributor Tim Beyers couldn't tell you how many issues of Detective Comics he has. All he knows is that it's a lot. Tim didn't own shares of any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Foolprofile. Time Warner is a Stock Advisor recommendation. Microsoft is an Inside Value recommendation. The Motley Fool has an ironclad disclosure policy.