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.

Kinder Morgan (NYSE:KMI)
Houston , Texas
52-week low-high: $56.85-$81.57
$9.2 billion market cap

By Rich Smith

Will someone kindly tell me why Kinder Morgan, a certified cash-generating machine, has to share its court with pipsqueak cash-burner Sirius? What is this -- JV night at the NCAA? Sirius isn't a contender. I mean, just listen to these guys:

"Failure of our satellites would significantly damage our business. Our three satellites were launched in 2000 and we do not have insurance covering our in-orbit satellites...."

Excuse me? Your whole business rides on three satellites, and you don't even have the dang things insured? Please, go on.

"If one of our three satellites fails in orbit, our service would be impaired until such time as we successfully launch and commission our spare satellite, which would take six months or more. If two or more of our satellites fail in orbit in close proximity in time, our service could be suspended for at least 24 months."

In other words, if one satellite short-circuits, your business has a heart attack. If two satellites fail, your company dies on the spot. Roger that. Anything else?

" Our business might never become profitable. As of December 31, 2004, we had an accumulated deficit of approximately $1.9 billion. We expect our cumulative net losses and cumulative negative cash flow to grow.... "

Lovely. And for the coup de grace, there's Tim's argument that: "At its current growth rate, by 2010 Sirius will nab at least 20 million subscribers...."

Please! Sirius claimed 1,143,258 subscribers as of December 31, 2004. To reach 20 million subscribers by 2010, Sirius needs to maintain a subscriber growth rate of more than 77% per annum.

If you really believe that Sirius can achieve 77% growth for five years, you'll believe anything. Hey, why don't we just name Sirius the winner of this tournament right here and now? After all, at 77% growth, by 2015, Sirius will have 345 million subscribers and $52 billion in revenue. It's a pipe dream -- we don't have that many people!

Which just goes to prove: There are lies, damn lies...and then there are projected growth rates.

Get serious. Vote Kinder Morgan.

Fool contributor Rich Smith has no position, short or long, in any company mentioned in this article.

Sirius Satellite Radio (NASDAQ:SIRI)
New York, N.Y.
52-week low-high: $2.01-$9.43
$7.49 billion market cap

By Tim Beyers (TMFMileHigh)

OK, Rich, we get it: Sirius is a risky investment. But that's no news flash. And what stock comes without risk? None. Just ask the folks at Kinder Morgan:

"Pending Federal Energy Regulatory Commission and California Public Utilities Commission proceedings seeking substantial refunds and reductions in tariff rates on some of our pipelines...."

Really? Tell us more:

"Regulators and shippers on our pipelines have rights to challenge the rates we charge under certain circumstances prescribed by applicable regulations. Some shippers on our pipelines have filed complaints with the Federal Energy Regulatory Commission and California Public Utilities Commission that seek substantial refunds for alleged overcharges...."

So, you're making profits on the backs of your partners? Yeesh.

Rich is one of my favorite Fools, a good writer, and, not coincidentally, a good attorney. He knows the risk factors pulled from the Sirius 10-K are required disclosures that paint the worst possible picture of the company to prevent future shareholder lawsuits. I did the same with Kinder Morgan's 10-K.

Fortunately, doomsday predictions have nothing to do with valuation. And say all you want about growth projections but, more often than not, these numbers come from guidance given by companies, and they're usually not far off.

Even the most pessimistic projection pegs Sirius' subscriber base at 13.9 million by 2010. That would bring in at least $2.2 billion in sales. Small growth stocks like Sirius can trade for as much as 20 times sales. (Heck, Kinder Morgan trades for nearly eight times sales!) So it's really not unreasonable to value the firm at 10 times 2010 revenue. That's a market cap of nearly $22 billion, at least a double if dilution skyrockets, but more likely a triple.

Remember, Fools: Speculation is part of the investing game. Even Benjamin Graham, the acknowledged father of value investing, recognized that in The Intelligent Investor. That's why this potential Rule Breaker should get your vote.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in the story at the time of publication. You can find out what is in Tim's portfolio by checking his Fool profile.

Tim's comparing apples to orange seeds here, people. Kinder Morgan may have to reduce a rate or two on a couple of pipelines. Big whoop. Out of 35,000 miles of pipe, that's not a "risk" -- it's an asterisk. -- R.S.

Sure, 77% subscriber growth would be hard to believe, except that Sirius more than doubled its subscriber base last year and expects the same this year -- and that's without Howard Stern or NASCAR or the NHL. Today, less than 2% of the population owns a satellite radio. If you think that number won't grow substantially -- that it is, as Rich says, a pipe dream -- then, please, give me some of what you're smoking. -- T.B.

Who won? Click here to cast your vote.

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