In the competitive spirit of college basketball's annual championship tournament, The Motley Fool brings you Stock Madness 2007! Our writers are making head-to-head arguments for their chosen stocks (but not necessarily investment recommendations -- this is, after all, a game), and you'll pick the winners with your article recommendations and Motley Fool CAPS ratings. Who will win the right to cut down the net? Let's tip things off and find out!

Let's get this little nugget out of the way now. I own both Microsoft (NASDAQ:MSFT) and Johnson & Johnson (NYSE:JNJ). I own them for a number of good reasons. Both businesses have defensible moats, pay increasing dividends, and trade at a reasonable price.

In fact, when you think about it, there are only so many products, services, or franchises you can be absolutely certain will exist five years from now. Particularly once you get outside the Dow components, which both these two businesses are. But if I had to pick one to buy today, it would be, hands down, Microsoft.

For all the headway Apple (NASDAQ:AAPL) has made lately, and all the press Google (NASDAQ:GOOG) gets for its applications, neither will displace Microsoft anytime soon. At work, most of us work with Windows and will continue to do so, because the corporate market is slow to change. If you take your work home at all, you need the same software at home, too. If you're like me, that means you're paying for a copy of Windows and installing it on your Apple computer. Even if I wanted to switch away from PCs, I wouldn't be able to get away from Microsoft. And while Google has put some interesting products out there, I don't think the transition is going to happen yet. There are some security and usability issues to overcome. There may ultimately be a threat here, but I could also see Microsoft being the one that transitions its own business over.

The next few years are shaping up to be pretty impressive for Microsoft. The company has rolled out new versions of Windows and of its Office suite, and the Xbox 360 has a sound lead over the PS3 from Sony (NYSE:SNE). This sales lead should start to feed upon itself as developers and players want to be with the dominant system in the market. This leads to where the real money is: game sales and peripherals. If there is a threat here, it's most likely to come from the Nintendo (OTC BB: NTDOY) Wii. But for the most part, the Wii will pull in a more casual gamer, and the traditional gamers are opting for the Xbox over the PS3.

Microsoft's financials are impeccable. Pick your financial metric of choice, and it's likely that Microsoft's performance is at the head of the pack. It all starts with the cash flow. For every dollar of sales Microsoft takes in, the company generates $0.26 in cash, or $11.9 billion in the past 12 months. The company has been steadily buying back shares, and it's reduced its share count by 1.8% a year over the last five years. Microsoft has also seen its returns on capital improve the last few years, and over the trailing 12 months, it has generated a 26% return on capital.

Microsoft isn't perfect. It will have products that struggle before succeeding, and some that ultimately fail. However, its core franchise is very tough to displace, and its valuation doesn't take into account all the cash flow the business generates. That's a combination that's made to win.

Does this stock deserve to move onto the next round? If you think so, simply follow this link and rank the stock "outperform" in Motley Fool CAPS. If not, vote it "underperform." Later this week, we'll tally your votes to determine which stocks will advance one step closer to the title.

Read our opposing article on Johnson & Johnson, or see all the entries in the tournament.

Do you think you could pitch your favorite stock -- or ditch your least favorite one -- in less than 27 seconds? That's what we're doing over at Motley Fool CAPS. Check out our new stock videos.

At the time of publication, Nathan Parmelee owned shares in Microsoft and Johnson & Johnson. He had no financial interest in any of the other companies mentioned -- but that's nothing personal. He was ranked 44th out of 24,254 CAPS investors. Microsoft is an Inside Value selection. Johnson & Johnson is an Income Investor selection. Nintendo is a Stock Advisor selection. The Motley Fool has an ironclad disclosure policy.