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, Monster Worldwide (NYSE: MWW).

Monster under the bed
Staring at problematic employment figures after a painful recession, it's easy to get excited about the parent company of online recruiter Monster.com. Whether Corporate America makes an organic recovery, or a stimulus injection gets companies hiring again, a company in Monster's shoes stands to make out like a bandit. Right?

Not necessarily.

For starters, Monster is a mess. It has posted a loss in two of its past three quarters. Analysts see a loss for all of 2010, with a slight dip in revenue. Wall Street sees improvement next year, but why wait that long?

By Monster's own account, its U.S. Monster Employment Index -- a gauge of online job demand -- has posted seven consecutive months of year-over-year gains. This has to mean that the first half of the year must have been a real winner for Monster, but the hard numbers say otherwise. Clearly, the first half of 2010 won't be called back for a second interview. Losses have widened, and revenue took a 10% tumble.

True, things will get better. Bookings are up nicely, a sign of future revenue growth. Unfortunately, Monster's guidance still calls for red ink and essentially flat revenue for all of 2010. Even old-school job-filler Manpower (NYSE: MAN) is holding up better, as analysts target a healthy profit on double-digit revenue growth this year.

Good news
There are other places to invest if you're banking on a turnaround. Let's collect the resumes. 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. 

  • 51job (Nasdaq: JOBS): You don't need to place your bets exclusively in stateside online recruiting. 51job is one of China's leading players in this fast-growing niche. It runs a popular online recruiting site. It also helps shore up its brand the old-fashioned way, putting out weekly collections of region-specific job listings through nearly two dozen local newspapers in China.

    There was some hesitation this week when China's Taobao -- the same marketplace that sent eBay (Nasdaq: EBAY) scrambling out of the world's most populous nation -- began offering free classifieds for companies seeking e-commerce hires. I'm not concerned.

    It's not as if Monster is losing any sleep over free classifieds on Craigslist. Real employers will pay up to find real employees. Monster does have some skin in China, but it's not the pure play that 51job is. Revenue in its latest quarter climbed 36%, with its online recruitment services surging a whopping 74%. China's economy is growing nicely, and will continue to be explosive.  
  • Yahoo! (Nasdaq: YHOO): Monster completed the purchase of Yahoo!'s HotJobs.com last month. This should tell you that Yahoo! doesn't necessarily see this as a growth industry. It should also be a warning to those eyeing next year's projected 16% top-line pop at Monster as if it's organic growth. It's not.

    Why did Yahoo! bail on HotJobs, when service revenue seemed like a great way to offset any flux in online advertising? The money alone won't explain it. Reports this week indicate that Yahoo! can get as much as $11 billion for its 39% stake in China's Alibaba, and CEO Carol Bartz says that she's not interested in unloading a good investment.

    Obviously, selling HotJobs for $255 million isn't a desperate move. There was a time when both Monster.com and HotJobs were forking over gobs of money for Super Bowl ads, so it's definitely suspicious that Yahoo! would be willing to part with it -- especially now, when its decision to outsource its search to Microsoft's (Nasdaq: MSFT) Bing would seem to give it more time to focus on premium dot-com services.

    I'm not singling out Yahoo! because it bailed on HotJobs, though. As part of the HotJobs deal, Monster entered into a multiyear traffic agreement with Yahoo!. Just as Microsoft will be sending Yahoo! a ton of cash for hogging its search box, Yahoo! will collect a lot of passive royalties in the coming years.
  • Dice Holdings (NYSE: DHX): Instead of running a general employment site, Dice digs deep into specialties with content-rich hooks. Its namesake Dice.com is a popular spot for tech job listings, because it's also a bustling community of techies. The same can be said of its dedicated sticky sites that serve up employment opportunities in financial services or jobs that require government clearance. It acquired RigZone.com last month, giving it a presence in the oil and gas industry. Unlike Monster, Dice has already bounced back from the hiring downturn. Revenue in its latest quarter climbed 11%, with margins expanding as net income soaring 33% higher. 

I'm sorry, Monster. You scare me -- and it's not even Halloween.

Microsoft is a Motley Fool Inside Value recommendation. 51job is a Motley Fool Rule Breakers choice. eBay is a Motley Fool Stock Advisor recommendation. Motley Fool Options has recommended a bull call spread position on eBay. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Microsoft. 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.