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.

Netflix (NASDAQ:NFLX)
Los Gatos, Calif.
$9.20
52-week low-high $9.25 - $38.62
$0.5 billion market cap

By Rick Aristotle Munarriz (TMF Edible)

You never forget your first red mailer. For just $17.99 a month, you can borrow three DVDs at a time and keep them as long as you like. Want more? Return a disc. Netflix foots the postage both ways. You know that you never wanted to set foot on Blockbuster's (NYSE:BBI) berber carpeting again. Now the latest releases are as close as your mailbox.

It's difficult to ignore the lure of Netflix and its content library of more than 35,000 discs. And you can easily see why Blockbuster is willing to sacrifice the value proposition of its bread-and-butter stores and why Amazon.com (NASDAQ:AMZN) wants in so badly. But Netflix has 2.6 million subscribers, and it's looking to close out the year with roughly 4 million members. The competition is unlikely to catch up.

Because the market hates uncertainty, it has marked shares of Netflix down to bargain levels. With a cash-rich balance sheet giving Netflix an enterprise value of just more than $300 million, how can you not like a new market leader selling at a fraction of the $700+ million in revenues that the company is guiding Wall Street to expect this year?

Netflix can't lose. Either the stock appreciates organically from here, or Amazon scoops it up at a premium. Blockbuster can't continue to undercut Netflix without crippling its stores, while Amazon doesn't have the distribution centers in place and the critical mass of millions of paying subscribers that assures next-day delivery in most metropolitan areas through regular first-class mail delivery.

This Motley Fool Stock Advisor pick is dirt cheap -- and I'm willing to put my money where my mouth is since I own some shares. As Netflix grows its subscriber base, expands its offerings, and draws the respect of sponsors, how can it lose?

Fool contributor Rick Munarriz has been a Netflix investor -- and subscriber -- since 2002. He does not own shares in any of the other companies mentioned in this tournament match.

Overstock.com (NASDAQ:OSTK)
Salt Lake City , Utah
$46.61
52-week low-high: $26.77-$77.18
$940 million market cap

By Jeff Hwang

Rick makes an intriguing case for Netflix, and I'd almost buy it myself. But if you're just tuning in, there isn't a better time to consider Motley Fool Rule Breakers selection Overstock.com.

The discount retailer has business momentum, with revenues growing at near hypergrowth rates. Overall, Overstock saw revenues more than double to $494.6 million in 2004. Gross profits jumped 158% to $65.8 million. Meanwhile, the business is effectively profitable, and the company finished the year with a healthy $287.5 million in cash on the balance sheet.

And here's the beauty of an Internet business: As gross profits grow faster than SG&A, Overstock will see its profits scale.

Overstock combines a new-age business and a shareholder-friendly manager with a classic pedigree. We've discussed controversial CEO Patrick Byrne several times over the past couple of years -- maybe even a little too much -- and the Owner's Manual and quarterly shareholder letters inspired by mentor Warren Buffett.

The company is quickly closing the gap between itself and rival Rule Breaker Amazon.com. Overstock also has a fledgling auctions business aimed at chipping away at the edges of eBay (NASDAQ:EBAY).

Need another good sign? After the stock took a hit following an impressive fourth-quarter report, Byrne bought $1 million in stock at under $49. At the same time, his father, former GEICO chief Jack Byrne, who -- in the words of Fool Bill Mann -- "has never once overpaid for anything in his life," bought $1.1 million in Overstock shares between $47 and $55 per share.

It's all about the O.

Fool contributor Jeff Hwang owns shares of Overstock.com and eBay.

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