With the end of the first quarter approaching, it is time to adjust the names in my Watch Lists. I will price all the new lists as of the close on Friday, June 29.

Today I present my planned updates to the Small Cap Watch List. There was a fairly high level of turnover to the list. 12 of the 24 names from the previous run made it to the current list, which was also 24 names. Performance-wise, the list created in March has returned an unweighted average return of 2.6% through June 28, with 80% of the stocks in positive territory. All of the money-losers from the previous list fell out of consideration.
So without further ado, the names on the chopping block from the previous list are: PW Eagle (PWEI), Insteel Industries (IIIN), Allied Defense (ADG - Annual Report), Hartmarx (HMX), Parlux (PARL), Hansen Natural (HANS), FirstFed Financial (FED), Young Innovations (YDNT), ITT Educational (ESI), Rent-a-Center (RCII), Valassis (VCI), and Travelzoo (TZOO). The castaways include four of the five money losers from the previous portfolio (HMX, PARL, YDNT and TZOO) as well as the biggest gainer (ESI).
The new list is:

I will continue to track both lists on StockPickr.

Small Cap Watch List (Track at Marketocracy) and Mid Cap Watch List (Track at Marketocracy) member Travelzoo (TZOO) reported earnings:

Travelzoo Inc., a global Internet media company, today announced financial results for the first quarter ended March 31, 2007, with revenue of $19.7 million, an increase of 17% year-overyear. Net income was $4.1 million, with diluted earnings per share (EPS) of $0.25, up from $0.24 in the prior year period.

Analysts were expecting the company to earn $0.32 on $20 million in sales. The reason for the miss, as explained on the conference call, was increased sales and marketing expense:

Total sales and marketing expenses were $7.9 million, up from $6.5 million in both Q1 2006 and Q4 2006. Sales and marketing expenses as a percentage of revenue increased to 42.5% in Q1 2007, from 39.3% in Q1 2006.

The increase from Q1 2006 was primarily due to increased salary expenses associated with sales and marketing staff, increased spending on marketing for Super Search, and increased spending on brand marketing campaigns.

The shares were trading down 16% in after-hours trading.

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:

The Watch List declined 0.83% this week, which trailed the S&P 500 again but provided a significant boost relative to the small and mid-cap benchmarks that are more appropriate comparisons. Landstar had a strange round-trip. CSG Systems had too much news for our comfort. Earnings season started with a bang.

Some other stories that didn’t make it to either an industry summary or their own post include:

Travelzoo profit up, but revenue misses forecast

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.