Every week, I recommend a stock that investors should consider dumping from their portfolios. I also nominate three stocks to take its place.

It's as simple as that. You don't need some fancy GPS system to find your way around the theme of this column. However, if you already have that GPS out, you may as well play along, given the subject of this week's trashing.

Who gets tossed this week? Come on down, Garmin (NASDAQ:GRMN).

Get lost, Garmin
This week's diss isn't going to be popular. But I promise that it's not an emotional response, even though I've never liked the outlandish Garmin TV ads. At its very heart, this is about me and my Nuvi.

I was bullish on Garmin two years ago, shortly after buying one of the company's portable navigation systems. I wish I could tell you more about my Nuvi, but I haven't set eyes on it in more than a year. After a few road trips, and between the work that online mapping sites and my iPhone do, the Nuvi quickly became a forgotten novelty item. I didn't need a redundant gadget in my car.

But there's more to my complaint than just a personal bias. Here are just a few of the reasons to believe that there's harm in Garmin.

  • Slowing sales growth has been accompanied by margin erosion, as a competitive climate forces pricing cuts. Earnings fell this past quarter, and there's little reason to expect that trend to improve in the near term.
  • Seventeen of the 18 analysts following the company have slashed the company's 2009 profit estimates since last month's uninspiring report.
  • The Nuviphone -- the device that was supposed to help Garmin compete in the GPS smartphone market -- is delaying its launch. That buys rival solutions even more time to establish their leads.
  • Inventory levels are stubbornly high. That makes  you wonder whether unsold units are already starting to collect dust.
  • Garmin appears to be attractively priced at 10 times earnings, but its quickly dimming growth prospects do not justify a higher multiple. In fact, if earnings continue to decline, the share price will probably fall even harder as the multiple expands.
  • Garmin is joining other GPS specialists in making a play in the automotive market, but that industry already has recurring revenue plays in place -- General Motors (NYSE:GM) has OnStar, and many other carmakers have the NavTraffic feature available on factory-installed XM receivers from Sirius XM Radio (NASDAQ:SIRI).

Good news
As I have every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting the heave-ho. Let's review the three fill-ins.

  • Apple (NASDAQ:AAPL): Smartphone makers such as Apple and Research In Motion (NASDAQ:RIMM) have been incorporating GPS functionality into their latest wireless devices. I was impressed two holiday seasons ago that my Nuvi could order up audiobooks through Audible, but that's no match for what I can do with my iPhone these days.
  • Nokia (NYSE:NOK): This company turned heads last year with its $8.1 billion purchase of leading mapmaker Navteq. With rival TomTom's having purchased Tele Atlas, Garmin is now doing more than just paying Nokia for its maps. Nokia will also be able to do more with its own handsets in the future. 
  • Google (NASDAQ:GOOG): All of the major online portals provide great roadmap features, and any of them will do in a pinch. But I'm partial to Google Maps, because Google is the undisputed leader in monetizing its page views. I gave Google the gold medal yesterday, and the company has earned it. Even before I got my iPhone, my Nuvi was cobweb bait when I began to simply fire up Google Maps at home before I hit the road.

Garmin won't go down without a fight. Nor is it going to disappear. However, anyone who isn't concerned about the current operating environment for Garmin -- not to mention its increasingly murky future -- is as lost as my misplaced Nuvi.

Other headlines out of the weekly circular file:

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.