The following article is part of The Motley Fool's "Stock Madness 2006," based loosely on the annual NCAA College Basketball Tournament, a.k.a. "March Madness." Throughout the competition, our writers and analysts will engage in head-to-head competition. You, dear readers, are the fans and referees -- after you read these exciting duels, your votes will determine who moves on to the next round of play. The writer who survives the tournament will be our champion and most valuable "coach."
But please, make no mistake -- "Stock Madness 2006" is a GAME!
My Biotech Dream Team of Amgen
And that's why we're all here, right? To make serious moola with our investments? And by that, I don't mean beating the S&P 500 by one or two percentage points a year over the next decade. Woo-frickin-hoo. Is that all you want for your portfolio? If so, go hop on the Tim Hanson bandwagon, because that's all that Tim's boring and bloated team will do for you over the next decade. Team Hanson's player mix of Berkshire, an REIT, a trucking company, and a refiner will deliver a total return that is likely within a few percentage points of the S&P 500.
Look at his star player, Berkshire Hathaway. Phenomenal company run by a legend. He can't lose, right?
Wanna know what those B shares have gotten over the past 10 years? About a 10% annualized return. Compare that with a total return of 8.9% for the S&P 500 over the same period. Wow. Pop the champagne cork.
As I said, there's nothing wrong with slightly outpacing the market. But we're here to make some real money, right? The kind of returns that absolutely smash the market? If that's what you want, my biotech lineup is the team to back.
Take BioMarin, for example. It's a small biotech company developing drugs for rare genetic diseases. The company has already launched two drugs, and a third is on the way. These are high-margin products with significant revenue potential and zero competition. That's a lot to like, right? Well, the market thinks so, too, and the stock is up 190% over the last 12 months. The best part? I think this is just the beginning for the company, and it has a long way to go.
Do you think Berkshire or a REIT like American Financial Realty will do anything close to that for your portfolio?
I don't, either. The choice is clear. Vote for the Biotech Dream Team.
Tim Hanson's rebuttal
If Charly wants to talk about the performance of Berkshire Hathaway, let's do just that. This is a company that, since 1965, has thumped the market by more than 11 percentage points per year. While a $1,000 investment in the S&P 500 in 1965 would be worth $50,000 today, that same investment in Berkshire would be worth $2.4 million.
That's the potential of investing in undervalued companies with outsized prospects and talented management teams. I have five such companies in my portfolio.
Motley Fool Rule Breakers biotech analyst Charly Travers owns shares of BioMarin and Rule Breakers recommendation Exelixis. Tim Hanson owns shares of Berkshire Hathaway andIncome Investorpick American Financial Realty. The Motley Fool has a disclosure policy.