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.
Lloyds TSB
London, U.K.
Price: $36.80
52-week low-high: $29.40-$39.51
$51.5 billion market cap
By John Reeves (TMF Bane)
I don't know about you, but my portfolio has taken a beating over the last couple of weeks. A weak dollar, soaring oil prices, and massive budget deficits have all combined to rattle the market. Many investors have seen their post-election gains wiped off the table.
In this uncertain environment, Inside Value selection Lloyds makes an ideal addition to your portfolio. Let's briefly review my earlier case for Lloyds. First, Lloyds offers a stunning 7% dividend yield. So no matter what, you will be receiving an income stream that represents a 7% return -- and this figure alone just might outperform the market this year. Second, Lloyds provides you with exposure to the pound. As everyone knows, the dollar has been plummeting in relation to the pound and the euro. Buying into a European company offers the investor an attractive hedge against the continued deterioration of the dollar. And finally, Lloyds is a turnaround story that might even provide considerable capital gains.
With chief executive Eric J. Daniels leading the reorganization, Lloyds has been able to establish a predictable set of businesses and cash flows. The company has jettisoned unprofitable business lines, cut costs, and focused on its profitable core products. And so far, the strategy has "come up trumps," as the English might say. In the most recent reporting period, earnings per share were up 12%, and growth in insurance and investments was up 18%. The popular Scottish Widows life and pensions brand has been a key driver of this growth. Management also noted that growth has been accelerating at an even faster pace in recent months.
The dollar may rally, oil prices might decline, and our friends in Washington might balance the budget... and the Easter Bunny might bring me an iPod on Sunday. Just in case those things don't happen, you might want to consider Inside Value picks such as Lloyds, Coca-Cola
John Reeves does not own any of the companies mentioned in this article.
Celgene
Summit, N.J.
$32.93
52-week low-high $22.47-$35.24
$5.5 billion market cap
By Charly Travers (TMFBreakerCharly)
Back in Round 1, I mentioned that Celgene's revenues and stock price have been soaring. Top-line growth has been running in excess of 30%, and the stock has tripled in two years. Today, I'm going to discuss why this company has been one of biotech's success stories and why I think this trend will continue.
Celgene is a winner because its drug Thalomid is effective in the treatment of a type of cancer called multiple myeloma. Although multiple myeloma is not curable, effective treatments such as Thalomid can dramatically reduce the symptoms and improve the sufferer's quality of life. Having a good drug where there is a real medical need is the hallmark of a top-notch biotech company.
And Celgene is not resting on its laurels. It has spent years tweaking the chemical structure of Thalomid to come up with compounds that are safer and more effective. The company invests a large percentage of its sales in research and development in an extensive effort that appears to have paid off. The most advanced of these drug candidates that have come from continued R&D, Revlimid, has had good data in late-stage clinical trials in the treatment of both multiple myeloma and a blood cell disorder called myelodysplastic syndrome (MDS). The market potential here is significant, and Revlimid could get its first approval early next year. That bodes well for the continued rapid growth of the company.
This only scratches the surface of what Celgene has in its portfolio. For a company of its size, it has a deep pipeline with numerous drugs in clinical trials for cancer and inflammatory diseases. While drug development is risky and not all of these programs will work, Celgene has enough shots on goal to land a few more winners. This is why I see it continuing its growth trajectory.
Fool contributor Charly Travers does not own shares of any company mentioned in this article.
Rebuttals
I've never subscribed to the Crossfire worldview that holds that I must have an extreme opinion on every subject under the sun. Celgene seems like a perfectly fine company, and I respect Charly's opinion on these matters. So there will be no attempt on my part to smear the competition. I guess it boils down to whether you want a steady-Eddie dividend stock like Lloyds or a riskier biotech growth stock in this uncertain market. We know Celgene can shoot the three, but can it play defense? -- J.R.
I'm a biotech guy, and I don't know anything about companies like Lloyds with bizarre behaviors such as issuing dividends. So since John and The Admiral both like it, then honestly, it's good enough for me. This matchup is kind of like the one between the tortoise and the hare. Unlike that story, though, the tortoise doesn't always come out as the best performer in investing, and that's why I favor Celgene's growth prospects in this round. -- C.T.
Who won? Click here to cast your vote.
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