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
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
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
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.
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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.