The house rules are simple in this weekly column.

  • I bash a stock that I think is heading lower.
  • I offset the sting by recommending three stocks as portfolio replacements.

Who gets tossed out this week? Come on down, Hewlett-Packard (NYSE: HPQ).

The HP weigh
It has been a little more than two years since I recommended dumping shares of HP in this column.

Not a bad call. Despite the mother of all tech rallies in 2009 and a market that continues to reward winners in 2010, HP's stock is trading 10% lower today than it was during my original diss two summers ago, well below the tech-heavy Nasdaq composite.

Naturally, I have new reasons to steer clear of HP -- as I delicately peck out this week's venom on an HP computer. Irony? Table for one.

These days, it's easy to rain down on HP for losing turnaround guru Mark Hurd, overbidding for recent acquisitions, and then vengefully suing Hurd despite handing him a meaty severance package.

Until proven otherwise, HP is a rudderless company.

After Hurd's shocking dismissal last month, I figured that the PC and printing giant would overcome the setback. Hurd had already done his part in cutting costs to beef up margins. An internal hire along the lines of Ann Livermore would be a logical way to keep HP humming along.

Unfortunately, now that HP has made this personal -- casting the spotlight back on its boardroom -- it will have to smoke out an outsider CEO. This is going to create more flux and morale-crunching job uncertainty.

I should also point out that HP's revival under Hurd was really more about expanding margins than getting consumers and corporations to buy into the brand. The company is doing a few things right, but it's not as if the digital revolution requires more HP printer cartridges than before. It's not as if HP will be more relevant in desktops, servers, and laptops -- or make much of a dent in tablets and smartphones -- in the coming years.

Go ahead and follow Hurd's lead. He wasn't after her. He was after an exit strategy.

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 the heave-ho. Let's go over the three fill-ins.

  • Apple (Nasdaq: AAPL): You didn't think you'd find Dell (Nasdaq: DELL) here, did you? There's a looming confidence problem coming to a head there, too. If you're going to think inside the box, you may as well go with the sultans of style. Whether we're talking about MacBooks, iPods, iPhones, and now iPads, Apple is the King Midas of consumer hardware. It's what Dell and HP want to be when they grow up. Apple shares are also a lot cheaper than you think. Despite the gargantuan run it has had over the past few years, the stock is fetching just 18 times this year projected profitability and a mere 15 times next year's bottom-line target.
  • IBM (NYSE: IBM): Dell and HP will never be the next Apple, but they do have a better shot at being the next IBM. Big Blue learned that there was more to life than razor-thin margins in the hardware space, so it has successfully expanded over the past decade into IT services and other business consulting endeavors. HP's beefy buy of EDS was clearly a case of Big Blue envy. IBM is a winner. It consistently lands ahead of analyst earnings estimates. It makes smart acquisitions -- hear that, HP? -- and it aggressively repurchases its shares so investors aren't diluted in the deals.
  • Oracle (Nasdaq: ORCL): I usually like to pepper this column with a small stock or two, but I may as well go three-for-three when it comes to blue chips as replacements. Larry Ellison's company is where Hurd wound up, after all. It makes perfect sense, because Ellison was quick to side with his friend Hurd during last month's blowup. He's perfect for Oracle, because Ellison loves to buy things. Hurd is the masterful cost-containment henchman to make it work even better.

I could have stretched my thesis this week. Instead of tech giants, I could have come up with acquisition targets in the tech world. Fat cash balances and voracious appetites will mean good things for niche-leading tech players.

It wouldn't surprise me to see Linux enabler Red Hat (NYSE: RHT) or content-delivery juggernaut Akamai Technologies (Nasdaq: AKAM) swallowed down in the coming months. HP and Dell are now too desperate to be loved by shareowners. They're going to find themselves overpaying for growth in the form of buyouts. It's one of the few times that it's better to side with the prey than the hunter.

At the end of the day, it's just one more reason to steer clear of HP.

Akamai Technologies is a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor selection. The Fool owns shares of International Business Machines and Oracle. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Longtime Fool contributor Rick Munarriz doesn't mind taking out the garbage every so often. He does not own any of the stocks in this story. Rick 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.