Where's the love? Valentine's Day came and went, and Cupid hasn't softened the cold, stony heart of this weekly column.

Every week, I rip a stock to shreds. Just to prove I'm not completely heartless, I then come right back with odes to three related stocks that I think will actually beat the market.

This week, I'm going with a stock that typically thrives during this lovestruck time of year. However, the company posted horrendous quarterly results last night, and its near-term prospects aren't all that inspiring.

Who gets tossed out this week? Come on down, Blue Nile (NASDAQ:NILE).

Dread, plight, and blue
The online retailer with a thing for engagement rings had a crummy holiday quarter:

  • Net sales fell by 23% to $85.8 million, and would have suffered a 27% haircut if not for an extra week added to the 2008 period.
  • Earnings dropped even more steeply, down to $0.24 a share. The company posted a profit of $0.45 during the 2007 holiday quarter, even with more shares outstanding a year ago.
  • Analysts were banking on a profit of $0.35 a share on $93.4 million in revenue.
  • Stateside sales posted year-over-year declines during every single quarter in 2008.

That's not a pretty picture. Sure, high-end jewelers are toast, too. Tiffany (NYSE:TIF) took a 35% smack in domestic comps during the holidays. However, Tiffany's 21% dip in catalog and online sales during the holidays means that it actually held up relatively well, compared to Blue Nile. Global giant Signet (NYSE:SIG) performed even better; its quarter ends a month later, but comps still only fell by 16% at the retailer's stateside stores.

The economy will come around eventually. Blue Nile is thankfully still profitable, and it's blessed with a cash-rich balance sheet sporting $3.68 a share in greenbacks. I just don't see a turnaround coming for several more quarters at the earliest, and the company itself is the poster child for buying in too soon.

Blue Nile spent $66.5 million to buy back 1.6 million shares through 2008. That's an average price of far more than $40, or roughly double where the stock is today. I'm a fan of buybacks, but don't be stupid, Corporate America. Only repurchase your stock when your fundamentals appear to have bottomed out. Otherwise, you're just teasing and cheating.

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.

  • Amazon.com (NASDAQ:AMZN)
    Obviously, any list of e-tailers doing things right must begin with the country's leading online store. As Blue Nile struggled to attract jewelry buyers, Amazon was a hotbed of traffic. Net sales and income climbed 18% and 9%, respectively, in the most recent quarter, even as Blue Nile sputtered. Amazon isn't a cheap stock, but will it ever be?
  • Bidz (NASDAQ:BIDZ)
    There are plenty of places to score jewelry deals. Overstock.com (NASDAQ:OSTK) and Amazon move a fair amount of discounted bling. However, no one makes the process quite as much fun as Bidz.com. A trip to its site is an immediate rush, with a dozen jewelry auctions counting down to their bargain-hunting conclusions. Bidz doesn't post results until next week, but it's hard to imagine it faring worse than Blue Nile. It certainly held up relatively better during the third quarter. With desperate jewelry manufacturers looking to move overstocked merchandise, companies like Bidz should be getting sweet merchandise deals these days.
  • The Knot (NASDAQ:KNOT)
    Love isn't dead, just because grooms-to-be are shying away from high-end jewelers like Tiffany and Blue Nile. During Blue Nile's horrendous fourth quarter, The Knot posted a 5% increase in revenue, with even healthier gains in national and local online ad revenue. An asset impairment hit turned a profit into a loss, but the company remains the top draw when it comes to wedding planning. Since Blue Nile is a Rule Breakers recommendation, it's only fair that I offer a fellow pick in The Knot. The recession may push out weddings or make couples think smaller, but that's all the more reason for wedding service providers to seek out leads through The Knot.

Other headlines from the rubbish bin:

Do you like my substitutions? Would you rather stick it out with the tossed company? Are there other stocks I should look at in future editions of this column? Let me have it in the comment box below.

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

Longtime Fool contributor Rick Munarriz wonders why Cupid rhymes with "stupid." He does not own shares in 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's disclosure policy recycles.