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 6, 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.
Plum Creek Timber
Seattle
, Wash.
$35.60
52-week low-high: $27.30-$39.45
$6.5 billion market cap
By Rich Smith
Well, here's an interesting turn of events. In Round 4 of this tournament, I'm to argue against Bill Mann and Apple (yep, again). And who is it that will oppose the tech darling from Cupertino this time around? A company that Bill introduced to Fool readers just under a year ago in a column entitled "A Tale of Timber and Love," Plum Creek Timber. A company that Bill declared to be, and I quote, his "favorite investment idea."
Thus we have, in essence, a battle between two patented Bill Mann picks. And as readers of the Motley Fool Hidden Gems newsletter can testify, odds are that either one of these companies has the potential to become a long-term winner. After all, as Hidden Gems author Tom Gardner pointed out last month, Bill's last four newsletter picks have walloped the S&P by a margin that simply boggles the mind: 149% to 13%.
The question facing Foolish investors, then, is which of these two likely success stories will better reward its investors. To that, I answer unhesitatingly: Plum Creek, because past is prelude.
If you look at the two companies' past stock performance, Plum Creek has markedly outperformed Apple for over a decade. Apple pre-dated Plum Creek on the public markets, but ever since Plum Creek became open for investment, the lumber king has solidly bested the computer wizard. And not by a mere a percent or two, but by a margin of nearly 2-1. What's more, comparing the two companies to a single standard, the S&P 500, you can see that over the past 15 years, Plum Creek has doubled the S&P's return, too. And Apple? Even after its recent run-up, Apple has only managed to tie the average.
Now, I'll grant you that Apple's new iPod has made that company a short-term success story over the past few months. But fashion is a fickle business, and that's what the iPod is -- a fashionable Walkman for tech divas. Over time, the iPod will lose its luster -- and its profitability, as rivals such as Dell
When that happens, Apple, its profits, and its 65 trailing P/E will all plummet to Earth. But standing right next to it, strong as an oak, Plum Creek Timber will continue growing.
Fool contributor Rich Smith has no position, short or long, in any company mentioned above.
Apple Computer
Cupertino
, Calif.
$40.77
52-week low-high: $12.75-$45.44
$33.32 billion market cap
By Bill Mann
Let's compare my company, Apple, with my opponent, Plum Creek Timber, an investment trust that holds several million acres of timberland.
Apple: We have the hottest audio gadgets in the world in our iPod series, starting with the original iPods, which hold up to 40GB of music and audio files, through last year's iPod Mini release, to the most recent innovation, the iPod Shuffle. In an industry without any real standard setters, our products' ease of use has made them the locked-up dominator in the MP3 wars. No one comes close.
Plum Creek: Wanna buy some wood?
Apple: One of the brilliant elements of our integration of music hardware and software is that we not only own the sales of the equipment and the music management software in iTunes, we also have the store with some 1,000,000 titles available for download. For pay. It's a nice residual for our shareholders.
Plum Creek: Wanna buy some wood?
Apple: Did we tell you about Tiger? It's our new operating system, and it once again shows why Apple Is Just Awesome. It's open source, which we hope will continue to keep it more secure than Microsoft's
Plum Creek: Wanna buy some wood?
Apple: Finally, there's the Mac Mini. While the words "Macintosh" and "Apple" have been nearly interchangeable for more than a decade, the iPod has actually helped diversify what our company is about. But we still live and breathe the Mac. With the Mac Mini (as well as the Shuffle), we're shattering some perceptions. No longer will Apple be known as a company that makes beautiful, highly functional, iconoclastic products that come at beautiful, iconoclastic prices. We've given up none of our culture of insisting that our products be aesthetic marvels, but we've made some of them substantially cheaper, thus making the decision to try out the Apple suite that much easier. We expect this will pay off for years to come.
Plum Creek: Wanna buy some wood?
Apple: Yeah, no thanks. Our equipment isn't made from wood.
Bill Mann owns none of the companies mentioned in this article.
Who won? Cast your vote here.
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