Stock Madness 2006: Tech Titan Triumphant?

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!

In today's clash of titans, two megastars butt heads in a battle for investing's top honors. It's a fight to the finish between tech titan Cisco (NASDAQ:CSCO) and drug kingpin Amgen (NASDAQ:AMGN). Who will win? Cisco, of course.

You see, while it helps to have a star on your team -- and both Cisco and Amgen certainly qualify -- one man can't carry a sports team to victory. Nor can a portfolio beat the market, unless its constituents pull together. That's where Team Amgen falls down.

Looking over today's players, I'm reminded of the 1993 NBA Finals between Charles Barkley's Phoenix Suns and Michael Jordan's Chicago Bulls. As in '93, each of our teams is led by a star. But this game has a twist: Sir Charles' teammates have been replaced by Elmer Fudd, George Costanza, Ziggy, and Mr. Magoo. Let's take a look at the lineups:

From the top to the bottom of its roster, Team Cisco starts strong and just gets stronger. Cisco earns more and has a better P/E than Amgen, despite analysts projecting the same 15% growth rate for each. Every member of Cisco's supporting cast offers either a lower P/E or a faster growth rate. Result: Cisco's teammates lower the average P/E of the portfolio without sacrificing growth.

In contrast, Amgen earns less and costs more than Cisco. And with each Elmer, George, and Ziggy it adds to the roster, Team Amgen's profits sink a little lower. It's a case of the whole not equaling the sum of its parts.

Thirteen years ago, Sir Charles and friends lost to the Bulls by the skin of their teeth. But today's contest isn't even close. Vote for Team Cisco.

Charly Travers' rebuttal
Reviewing financial statements and valuation metrics should be every investor's first step in assessing a company. But it can't be the only step. That's where Rich's argument against Team Amgen falls short. The companies on my team have real products in development for serious diseases.

Take BioMarin, with its drugs for fatal genetic diseases, or Exelixis, with its incredibly deep pipeline of cancer drugs. I think these R&D programs are valuable, and so does the market. Over the last 12 months, BioMarin is up a staggering 175%, while Exelixis has increased in value by 72%. Investors in Team Amgen are very happy folks right now.

Check out Charly's team, then vote for the winner!

Fool contributor Rich Smith has no position, short or long, in any company mentioned in this article. Fool biotech analyst Charly Travers owns shares of BioMarin and Exelixis. Exelixis is a Motley Fool Rule Breakers pick, while CarMax is a Motley Fool Inside Value pick. The Fool has a disclosure policy.