The following article is part of The Motley Fool's "Stock Madness 2005," a contest based loosely on the annual NCAA College Basketball Tournament, a.k.a. March Madness. From March 17 to April 4, our writers and analysts will engage in head-to-head competition with each other, advocating and arguing on behalf of 64 stocks we've selected as among the most interesting to Foolish investors. You, dear readers, are the fans and referees -- you'll read these exciting duels and then vote for the stock you think is the better investment... and should therefore move on to the next round of play. The company that survives six "games" will be our tournament champion, and its writer our most valuable "coach."
But, please, make no mistake -- "Stock Madness 2005" is a GAME!
Our writers are doing this for fun. They are enjoying the spirit of competition and the art of debate. They are delighting in the search for positives in the companies they've drawn... and negatives in the companies they're pitted against. They are NOT necessarily recommending these stocks as the ones they believe in above all others. As ever, YOU must decide whether the stocks we're writing about -- winners and losers -- are deserving of your investment dollars.
Geron
Menlo Park, Calif.
$6.71
52 week low-high $5.15-$11.15
$366 million market cap
By Charly Travers (TMF BreakerCharly)
If you get all giddy about high-tech, cutting-edge technology, Geron is going to be right up your alley. In the biotech industry there's not much that stirs up as much interest as stem cell research, and Geron is one of the top dogs in the field. I've written in the past that stem cells are extremely high-risk research programs, so a lot of caution is certainly warranted. That being said, I think there's a lot of potential for a real breakthrough one day, even if we don't know when that time may come. For anyone interested in stem cell research, Geron definitely belongs on the watch list.
But there is more to Geron than just the highly speculative stem cell angle. The company is taking a very interesting approach to the treatment of cancer by targeting an enzyme called telomerase. This enzyme is needed for cancer cells to continue dividing indefinitely. Geron is going after it with a two-pronged approach. The first is a telomerase vaccine, which directs the immune system to kill the tumor cells that contain telomerase. If this works it has the potential to be more tolerable to patients than conventional chemotherapy.
Cancer vaccines are also on the high-risk end of the drug development spectrum. So I like the fact that Geron has also decided to target telomerase in a more traditional manner by directly inhibiting the enzyme's activity. While this program is still in the very early stages of development, it is interesting and potentially very important.
There can be no illusions about Geron regarding its risk profile. It is working on some interesting stuff, but there's still a lot left to prove. This is highly speculative. Nevertheless, it will be quite exciting if some of these projects work out. Sink or swim, it certainly won't be a boring experience.
Motley Fool Rule Breakers biotech analyst Charly Travers does not own shares of any company mentioned in this article.
UTStarcom Inc.
Alameda, Calif.
$12.98
52 week low-high $12.39 - $32.15
$1.48 billion market cap
By Dave Mock
An aggressive competitor in the telecom space, UTStarcom brings its best game up against cancer biopharma Geron. UTStarcom provides products for the mobile and networking market -- everything from cellular phones to switching gear to VoIP (voice over Internet protocol) equipment.
UTStarcom has put into place aggressive initiatives to target new growth in the past few years. The most recent, vivid example is its acquisition of wireless phone maker Audiovox late in 2004.
Audiovox has been a large supplier of handsets to many Asian mobile operators, as well as Verizon
UTStarcom has a strong presence with other products in China and other Asian markets, as well. As a primary supplier of PAS (Personal Access System -- a limited mobility voice and data service) equipment in China, the company has captured more than 37 million subscribers for this service.
The company is also pushing into other exciting growth areas of telecommunications, including all IP networks that enable VoIP, optical networks, and interactive television (often called IPTV).
Last full-year sales were $2.7 billion, up from $2 billion a year earlier. That's growth that few equipment providers still see.
With roughly $800 million in cash, growing sales, and a P/E of 10, stock in UTStarcom is on the radar of many investors for good reason -- there's a lot of real potential packed into a company that's had its shares beaten down recently. If it pans out, investors who had faith will be happy clams.
Fool contributor Dave Mock takes shrimp over clams, clams over oysters, and eggs over easy. He owns shares of UTStarcom.
Rebuttals
There is something about UTStarcom that is setting off warning bells. All appears healthy on the surface; this is a company that has made Forbes' list of Top 25 Fastest Growing Tech Companies and has tremendous top-line growth. But if everything is fine and dandy, why is the stock down more than 60% in the past 18 months? That's significant for a tech company over a period in which the Nasdaq has done very well. The market seems to think something stinks. Dave is spot-on with Geron. This small biotech is highly speculative and will either be a home run or a strikeout. Despite the interesting science, the company is far from a sure thing. -- C.T.
As Charly mentioned, Geron is at a very early stage with developments that have a high risk of imploding. UTStarcom is making billions in revenue a year, compared with Geron's $1 million. Early-stage developers are not far from a high-odds crapshoot. They can have serious downside risk as well, especially if trials don't pan out. UTStarcom has a significantly lower risk profile but provides substantial potential for upside. -- D.M.
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