Investing is a lot like trying to stay a few pages ahead in a mystery novel. If you can see where the storyline will go, you can profit from Mr. Market's masterful whodunit.

That's what I try to do with this weekly column. I don't want to be on the same page as everybody else. I want to skip ahead a few chapters and know how things end.

However, even though I bash a stock, I also come right back and offer three perfectly worthy stocks as portfolio replacements.

Who gets tossed out this week? Come on down, Barnes & Noble (NYSE:BKS).

Read 'em and weep
It's easy to get excited about Barnes & Noble right now. The stock has run up more than 50% since bottoming out 11 months ago. It has beaten analysts' earnings estimates in each of the three past quarters.

The country's leading bookstore chain has a big announcement coming next Tuesday, one that it promises will be "a major event" in the retailer's history. We already know what will happen: B&N will introduce its e-book reader, in an attempt to finally take on Amazon.com's (NASDAQ:AMZN) Kindle and Sony's (NYSE:SNE) Reader.

Some of the product snapshots were leaked to Gizmodo this week, and B&N's device looks slick. The portable reader has a multitouch screen in full color.

The problem, of course, is that there's no way that B&N will be able to match Amazon on price. The Kindle hit the market at $399 nearly two years ago. Three price cuts later, bibliophiles can get a shiny new Kindle for just $259.

Unless the B&N gadget doubles as a coffee maker, vacuum cleaner, or tennis instructor, the company is going to have a hard time persuading cash-strapped patrons to fork over $300 to $400 for this thing.

The e-book market is intriguing, but it's probably a smaller market than anyone thinks. Only hardcore readers can make up the three-figure price tags in e-book volume, and many of those will die as traditional page-turners.

The bigger question may be what B&N stands to gain by turning its most active customers into digitally based homebodies. Can B&N succeed when all that's left is the lunch-break crowd that waltzes in to leaf through magazines and "how to" guides that won't be purchased?

If it's successful, B&N will wean readers off its bricks-and-mortar stores but keep them buying products. If it fails, it's simply telegraphing its self-admitted obsolescence and educating shoppers on the merits of digital delivery. It can learn a thing or two from Blockbuster (NYSE:BBI), a media retailer that threw its hat into the digital ring with aplomb several years ago, only to realize that it's more important to reposition its stores into relevance regardless of which way the digital winds blow.

B&N has a few advantages. The target e-book audience strolls its aisles. It also has a publishing arm, so it can deliver pricing advantages on the e-book side. However, it's hard to buy into Wall Street's enthusiasm. Analysts see revenue growing by 13% this fiscal year and accelerating to 17% next year. They see earnings soaring by 72% next year, a big bounce back from this year's dip.

But don't you have to actually be growing for those projections to materialize? Comps fell by 6.9% in its latest quarter, and that situation is not going to get a lot better if the digital revolution continues.  

I'm sorry, B&N. I've read this stock before. It doesn't have a happy ending.

Good news
As I do every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting tossed. Let's go over three new fill-ins.

  • Amazon.com: This isn't just bravado from a Kindle owner, as I haven't used my e-book reader in ages. Amazon is just the better company. In its latest quarter, B&N's website generated $102 million in sales, or a 2% increase over the previous year. Amazon sales clocked in at $4.65 billion, a 20% spike after adjusting for foreign currency translations. B&N may have its bread-and-butter business to lose if folks go digital, but Amazon will simply cash in on the higher margins available through the inventory-free wonder of digital books. No more subsidized shipping, and regular contact with its readers: Amazon will be sitting pretty as all of its media wares go digital.
  • Google (NASDAQ:GOOG): One of Gizmodo's claims is that B&N's reader will play nice with the Google Books digitizing initiative. It's easy to see how Google and publishers will fare, as the world's leading online advertising platform can easily monetize digital reads. Booksellers are the question mark, especially as more devices cut out the retailing middleman in the future.
  • Apple (NASDAQ:AAPL): If one company can get away with knocking out the Kindle at a higher price point, it has to be Apple. The iTablet hasn't been officially announced, but it's as certain to arrive as is next week's B&N digital debut. The fact that the tablet is likely to do more than just read books and periodicals will be problematic for B&N's offline and online models. Once full-bodied computing devices become the source through which we consume paperbacks and newspapers, how will B&N, Borders Group (NYSE:BGP), and their lesser peers make a living?

Sorry, Barnes & Noble. You're giving me paper cuts.  

Apple and Amazon.com are Motley Fool Stock Advisor picks. Google is a Rule Breakers recommendation. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz always takes out the garbage. He owns no shares in any of the stocks in this column and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.