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.

Martha Stewart Living Omnimedia (NYSE:MSO)
New York , N.Y.
52-week low-high: $8.25-$37.45
Market cap: $1.1 billion

By Seth Jayson (TMF Bent)

"Martha Stewart rulez dude!" That may not be how they phrase it, but it's certainly been the sentiment of many gullible Stewart fans, especially those who drove shares of Martha Stewart Living Omnimedia to recent highs, despite a complete lack of anything like profits, revenue growth, or effective leadership.

Shares of Martha Inc. have dropped by a nice 40% since her highness was sprung from Camp Cupcake to face the lights and cameras of a vapid, forgive-and-forget press. Quick note to all those who wrote to berate me for my lack of faith in Saint Martha. Told ya so. That's why I'm proud to coach team MSS (Martha Stewart Shorts) through our Foolish tournament. Quite simply, Martha's company has got plenty left to lose, and the smart money will bet against it.

You've heard of point-shaving, right? That would be illegal, like insider trading -- which Martha never did, as far as the courts are concerned. But it's not point-shaving if we at MSS don't miss shots on purpose, right? I'm entitled to bet against my team and then put Sparky, my 5'6", 120-pound center into the game whenever we're getting close to covering the spread, right? Surely there's nothing illegal about that. Sparky deserves playing time, just like a broker needs to call his client when he finds out that a major insider is dumping shares of a company she owns. No harm, no foul, right? Anyone complains later, it's just an overzealous male conspiracy. You remember that.

Actually, we at MSS don't think it needs to come to that. We can just sit back and watch MSO go about its business as usual -- delivering consistent losses. For years, Martha's namesake corporation has been bleeding money like a stuck porker from her back yard. Even if Martha's brand could regain its old luster and turn max profits right now, it would still be trading at a price-to-earnings multiple somewhere around 45, a number reserved for consistent, high-growth powerhouses, and Martha Inc. ain't ever been one of those.

In short, MSO is one bad team. The assistant coaches have been leaving, and the rest of the crew sold its shares when the selling was good. A bet on this loser -- to keep losing -- is very smart money.

Seth Jayson wishes he'd stopped recommending a Martha short and just done it. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here.

Colgate-Palmolive (NYSE:CL)
New York , N.Y.
Price: $52.73
52-week range: $42.89-$59.04
Market cap: $27.7 billion

By Brian Richards

Here's a riddle for you: What do UCLA and Fidelity Magellan have in common?

Stumped? Well, between 1964 and 1975 UCLA won 10 national championships, including seven in a row. From 1977 to 1990, Fidelity Magellan earned an amazing 29% annual return for its clients.

The legends of John Wooden and Peter Lynch were formed in a simplistic, common-sense philosophy. Both guided with a "go with what works" philosophy. Wooden ran his offense through the post, where All Americans Alcindor and Walton shined. Lynch ran his fund by investing in solid, everyday Main Street companies, such as 7-Eleven (NYSE:SE).

Who am I to disagree with that approach? Not many companies have the ubiquitous branding that Motley Fool Inside Value recommendation Colgate-Palmolive enjoys. Aside from its namesake products, CL is behind Irish Spring, Speed Stick, Afta, Ajax.... The list is lengthy.

Colgate-Palmolive is a consumer stalwart with dominance in the oral-care market. Though the company boasts internationally recognized brands that provide strong competitive advantages, it has continued to build a robust pipeline of new products in the home-, personal-, and oral-care markets, perhaps anticipating intense competition from the Gillette (NYSE:G) and Procter & Gamble (NYSE:PG) merger.

To further improve profits, Colgate-Palmolive recently announced a painful but necessary four-year plan to cut its global workforce by 12% (about 4,000 jobs). Management has also started consolidating country-by-country operations to a more efficient regional plan.

Behind those solid brands stands an equally solid management team with a consistent buyback policy. Colgate-Palmolive was recently one of only 34 worldwide companies awarded a perfect 10 in global governance ratings.

It also delivers consistent dividend growth. Management recently announced a 21% dividend increase -- besting its average 14%-per-annum growth over the past 27 years.

I'm guessing most Americans don't want a diet of broths and apple sauce. As Inside Value advisor Philip Durell said, "The nature of Colgate's brands is as close as we get to a predictable return on our investment.... We will keep brushing our teeth in a recession."

One last riddle: Does the idea of stable and predictable growth in the long term sound appealing?

Though Brian Richards is a fan of Colgate Total Plus Whitening, he does not own any company mentioned in this story.

I refer readers to the 10-K. -- S.J.

Don't buy in to the shorts. Sneaky Seth has put forth a compelling case for MSO to tank, a position that assumes the public will recognize MSO's shortcomings and stay away. Don't forget that Martha has a personality cult and that she'll soon be smiling on an Apprentice-like reality TV show. When she's as popular as The Donald in six months, will people even care that her business bleeds money? -- B.R.

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