With the end of the first quarter approaching, it is time to adjust the names in our Watch Lists. We will price all the new lists as of the close on Friday, March 30. Today we present our planned updates to the Mid Cap Watch List (Track at Marketocracy).

As with the Small Cap Watch List (Track at Marketocracy), we were surprised at the amount of turnover in our screens. Only 7 of the original 29 names made the cut for the new list (which comes in at only 24 names.) Part of the reason for the turnover was to reduce the overlap between the Small Cap and Mid Cap Watch List (Track at Marketocracy)s. Now there is only one-third overlapping names rather than two thirds. Furthermore, given the level of outperformance we saw in the first quarter (actually just two months) and the fact that much of those gains were achieved early, perhaps the turnover is warranted.

So without further ado, the names on the chopping block from the previous list are:

Silgan Holdings (SLGN - Annual Report); Middleby (MIDD); Olin (OLN); Vector Group (VGR); Sanderson Farms (SAFM); Tesoro (TSO); Downey Financial (DSL); Waddell & Reed (WDR); Gamco (GBL); Apria Healthcare (AHG); Quest Diagnostics (DGX); ITT Educational Services (ESI); Equifax (EFX); Delhaize Group (DEG); Papa John’s (PZZA); Rent-a-Center (RCII); Cato Corp (CTR); Dassault Systemes (DASTY); Ingram Micro (IM); Energy East (EAS); South Jersey Industries (SJI - Annual Report); and American States Water (AWR).

The new list is:

With the end of the first quarter approaching, it is time to adjust the names in our Watch Lists. We will price all the new lists as of the close on Friday, March 30. Today we present our planned updates to the Small Cap Watch List (Track at Marketocracy).

Frankly, we were surprised at the amount of turnover in our screens. Only 9 of the original 29 names made the cut for the new list (which comes in at only 24 names.) Still, given the level of outperformance we saw in the first quarter (actually just two months) and the fact that much of those gains were achieved early, perhaps the turnover is warranted.

So without further ado, the names on the chopping block from the previous list are:

Silgan Holdings (SLGN - Annual Report); Steel Dynamics (STLD - Annual Report); NVR (NVR - Annual report); Middleby (MIDD); Vector Group (VCG); Sanderson Farms (SAFM); Downey Financial (DSL); Waddell & Reed (WDR); Wilshire Bancorp (WIBC); Harrington West (HWFG); Gamco Investors (GBL); Apria Healthcare (AHG); Papa John’s (PZZA); Cato Corporation (CTR); Meredith Corporation (MDP); CSG Systems (CSGS); Energy East (EAS); Dynamics Research (DRCO); Ingram Micro (IM); and Dade Behring (DADE).

The new watch list will be:

We asked, but no one answered. So we are taking our own counsel and breaking our Watch List into three portfolios: Small Cap, Mid Cap and Large Cap. Each will be tracked against the relevant S&P index going forward from their collective inception date of January 31 (priced at the close of market trading that day.)

For your viewing pleasure, the Mid Cap Watch List (Track at Marketocracy) (to be measured against the S&P 400) follows.

Astute observers will notice a significant overlap between the names in the Small Cap Watch List and this one. In fact, of the 29 names on the Small Cap Watch List (Track at Marketocracy), 19 are included among the 29 names in the Mid Cap Watch List (Track at Marketocracy). The main reason is that we ran our screens against the criteria in the relevant indices rather than the names in the indices. Since the largest market cap in the S&P Small Cap is $3.5 billion and the smallest market cap in the S&P Mid Cap is $600 million, there is room for a good deal of overlap if one is willing to accept it.

In addition, we will provide a “quick and dirty” analysis of each name, with a goal of one such analysis per day. As the name implies, the quick and dirty analysis will be incomplete. We are hoping you will join in the debate and fill the gaps in our analysis.

We asked, but no one answered. So we are taking our own counsel and breaking our Watch List into three portfolios: Small Cap, Mid Cap and Large Cap. Each will be tracked against the relevant S&P index going forward from their collective inception date of January 31 (priced at the close of market trading that day.)

For your viewing pleasure, the Small Cap Watch List (Track at Marketocracy) (to be measured against the S&P 600) follows.

In addition, we will provide a “quick and dirty” analysis of each name, with a goal of one such analysis per day. As the name implies, the quick and dirty analysis will be incomplete. We are hoping you will join in the debate and fill the gaps in our analysis.

Summary:

The spread between corporate and treasury bonds has been holding steady near its long term (since 1962) average but toward the low end of the more recent history. The low spreads should be positive for the stock market and capital spending, as it reduces the cost companies pay for capital. We’d hate to see what the market and capital spending would look like if the spread widened.

Watch List news:

The Watch List names lost 4.37 percent this week, worse than any of the benchmarks. Again, not surprisingly given the median market cap of Watch List members, the performance was closest to the small-cap indices and it is still slightly ahead of them since inception.

It was a busy week, with earnings warnings from Borders Group (BGP), BJ’s Wholesale (BJ) and Yankee Candle (YCC), and an earnings disappointment from Journal Register (JRC). Ceradyne made its nuclear ambitions concrete, but will have a tough time fighting an Armored competitor. Hansen Natural (HANS) got kudos from Fortune.

Other news, that was fit to print but didn’t fit, includes:

Starbucks to up noncoffee merchandise for holidays – Yahoo! News

The holiday line-up will feature a glittery snow globe on a gold-colored base, at least three kinds of Christmas ornaments, a reusable Advent calendar that turns into a miniature chest of drawers at the end of the season and a dessert plate reading “Cookies for Santa.”

NTT DoCoMo going Super 3G

NTT DoCoMo, Inc. announced that starting today it will accept proposals from suppliers for development of equipment for Super 3G base stations and handsets.DoCoMo will select one or more suppliers for each of these categories around October and aims to complete the technology with the selected suppliers before the end of 2009.

The Super 3G standard is expected to provide superfast downlink data rates of over 100Mbps and uplink data rates of over 50Mbps, low-latency data transmission, and improved spectrum efficiency.

Accenture Acquiring Advantium and Meridian Informed Purchasing, Two Companies Specializing in Profit Recovery and Analytics

The two companies use sophisticated processes and proprietary software to analyze clients’ procurement and payables data to prevent, detect and recover the lost profits, or erroneous payments, which can result from human error, system-integration issues, contract non-compliance and fraud.

Cognizant (CTSH) forms digital media center of excellence.

Statoil’s Valkyrie well disappoints.

Travelzoo continues its growth in the UK.

Brunswick sneezed and MarineMax caught a cold.

KCS Energy acquisition by Petrohawk closed.

Pinnacle (PNCL) asked to place additional aircraft lease deposits.

In September 2005, Northwest Airlines, Inc. requested that Pinnacle Airlines, Inc., a wholly-owned subsidiary of Pinnacle Airlines Corp. (collectively, “Pinnacle”), pay $21,700,000 in additional aircraft sublease security deposits by March 1, 2006. Pinnacle has disputed Northwest’s right to seek additional security deposits at this time. Northwest has extended its deadline to August 14, 2006 while the parties continue ongoing discussions regarding their future business relationship.

Gabelli to Pay $130 Mln to Settle With US on Cell Licenses.

Campbell Soup to sell UK, Irish units for $845 mln. That’s a cash infusion equal to five percent of the market cap.

Disclosure: Author is long Starbucks (SBUX) at time of publication.

The Watch List returned 2.86 percent in its first week, which was better than the S&P 500 but not as good as the mid- or small-cap indices that are probably a better comparison. We have now indexed the Watch List to 100 effective at the June 30 close (it was billed as the Watch List for Q3, after all) and will monitor it on that basis going forward.

Here are a few news items that affected Watch List names and that we didn’t give a separate post.

Valassis Communications (VCI) cut its earnings outlook

Valassis decreased its second quarter earnings per share guidance to a range of 38 cents to 42 cents, versus earlier guidance of 49 cents to 55 cents. Full-year expectations were trimmed to a range of $1.60 to $1.80 from a previously range of $1.95 to $2.15.

Analysts polled by Thomson Financial were expecting earnings of 51 cents for the quarter and $1.99 for the full year.

The company cited a slowdown in sales and pricing pressure in both its free-standing insert business and neighborhood-specific advertising. The company also said a suspension of its stock buyback program would effect earnings per share.

Accredited Home Lenders Assumed Aames Financial’s Wholesale Operations Ahead of Merger

Accredited Home Lenders Holding Co. (LEND), a mortgage company specializing in non-prime residential mortgage loans, announced today that it would absorb the wholesale operations of Aames Investment Corporation (AIC) under an agreement dated June 23, 2006. This move is designed to reduce employee attrition and maximize the expected synergies from the combination of the Accredited and Aames wholesale operations that would otherwise occur as part of the merger of Accredited and Aames contemplated to occur in the third quarter of 2006.

Conoco Phillips (COP) is open to new deals. Among them – a stake in a natural gas pipeline.
Sierra Health (SIE) got some more credit. At a lower rate.

American International Pasta (PLB) still likes Sysco, but wants to see other distributors. But if they don’t file their 10K by the end of the year, they could be delisted.

Mario Gabelli’s Broken Legacy (GBL)

Birinyi thinks it may be time to look at the homebuilders again. (NVR, OHB, TOL)

Copper surplus? (FCX - Annual Report)

If Microsoft revolutionizes business communications, Plantronics (PLT) will be there to help.

Dade Behring (DADE) is changing auditors.

Brazil’s Gerdau (GGB) bought Peru’s Siderperu.

Luxury soup (CPB).

Gold bugs think the Fed is too soft on inflation. (GG, GLG)

Lakeland Industries (LAKE) announced a largely pointless stock dividend.

Par Pharmaceuticals (PRX) to manufacture generic version of high blood pressure treatment Norvasc starting in late 2007.

UT Starcom (UTSI) filed its previously delayed reports.

Libbey (LBY) sets table for Mexican dinner.

Heineken starts up Indian JV.

Helix (HELX) closed the buyout of Remington Oil and Gas.

Stifel Nicolaus likes the beer stocks.