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.

First Data (NYSE:FDC)
Denver , Colo.
52-week high-low: $38.50-$46.80
$32.8 billion market cap

By Nathan Slaughter

Coming into this match, my opponent looked pretty formidable on paper. Then I dug deeper and discovered that Fannie Mae had overstated its points scored this season by around $9 billion or so. In the interests of good sportsmanship, I won't provide any locker-room bulletin-board fodder by attacking the scandal-ridden mortgage giant publicly -- there's enough scathing material out there already -- but I would like to ask the spectators one question.

Even if Fannie Mae doesn't have any more accounting problems lurking around the corner, do you really feel comfortable wearing the colors of a team that's in the midst of a management shakeup, has fired its auditor and slashed its dividend, and has been forced to restate its earnings?

Meanwhile, with Fannie Mae tiptoeing close to serious foul trouble, Motley Fool Inside Value pick First Data has been exhibiting teamwork at its finest. Its three top players -- money transfer, merchant processing, and card issuing -- are each league leaders in their respective positions.

I know I'm not the only person who has forgotten what actual currency looks like, nor am I the only one who routinely signs debit card receipts at McDonald's (NYSE:MCD) for $3 -- for we are many. Consumers have grown increasingly fond of electronic payments, which have overtaken cash and checks as the most popular form of payment. No one stands to benefit from this sweeping trend more than First Data, which processes more than half of the nation's Visa and MasterCard credit and debit volume. In fact, according to Morningstar, the firm handles four times as much business as its nearest rival.

Aside from processing all those millions of in-store, online, and ATM transactions, First Data is also parent to Western Union -- a worldwide leader in providing money-transfer and electronic bill-payment services. Seven times every second, someone uses Western Union to send money, and this one unit chipped in more than $1 billion in profits last year on juicy profit margins of 33%. The company's card-issuing division has mailed out more than 135 million credit, debit, and gift cards, and it converted 58 million last year alone.

Here's what all of this translates to: mountains of recurring cash flows, a recent tripling of the company's dividend, and a 33% surge in net income last year, driven by double-digit revenue growth across all three divisions, for more than $10 billion total. Talk about a triple-double.

Fool contributor Nathan Slaughter owns none of the companies mentioned.

Fannie Mae (NYSE:FNM)
Washington , D.C.
52-week high-low: $53.80-$77.80
$53.2 billion market cap

By Philip Durell (TMF Admiral)

The irony of the Stock Madness tourney's seeding committee is not lost on me, for the committee members have presented me with a challenge in which it is impossible for me to lose. How good is that? You see, Fannie Mae and First Data are both recommendations in my Inside Value newsletter. So whether you vote for Nate's argument or mine, I still win.

Given that I picked First Data for Inside Value, I'm hardly going to disagree that First Data is an excellent choice for long-term price appreciation, considering that it owns some franchise businesses including Western Union. However, I believe that Fannie may just prove to be a better, although volatile, investment proposition. Yes, I've read the "Fanron" gibes, but to me, this is much more like Tyco (NYSE:TYC) in 2002 than it is like Enron. Back then, I heard the same castigation of the CEO and CFO for accounting misdeeds, which, although detrimental, did not affect the long-term viability of the company. And, just as in Tyco's case, the old CEO and CFO are no longer at the helm of Fannie. One thing I always look for in such situations is a change of management. By the way, I bought Tyco at around $20 and at $11. Today, it's worth more than $34.

I'm sure that Nate will scare you with tales about a potential $9 billion in earnings restatements, increasing capital requirements, and the probability of a more restrictive regulatory environment. However -- with due respect to Nate -- if he knows, then the whole market knows, and it's reflected in the stock price! In fact, I'm willing to bet that, as usual, the market has oversold Fannie. Can it go lower? Yes, of course it can. But like Tyco, this one is set to rebound in the medium term, and I'll tell you why in the next round.

Philip Durell is the analyst for the Motley Fool Inside Value newsletter. His wife owns shares in Fannie Mae.

Philip goes to great lengths to make his case that Fannie Mae is not following directly in Enron's steps. I absolutely agree. However, if the most compelling argument a stock has in its favor is that it's not spiraling into bankruptcy as the next Enron, that hardly inspires much confidence.

In the interests of highlighting First Data's positives rather than pointing out Fannie Mae's negatives, I intentionally overlooked the increasing capital requirements and regulatory scrutiny that Philip spoke of. However, I would like to thank him for calling these to everyone's attention, since both are excellent examples of the obstacles that Fannie Mae faces going forward. -- N.S.

Whatever, Nate. I win either way! -- P.D.

Who won? Go here to cast your vote.

The Motley Fool is investors writing for investors.