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 New Jersey Resources (NJR) Reported Fiscal Second-Quarter Earnings and Increased Earnings Guidance:

New Jersey Resources (NYSE:NJR) today reported its second-quarter earnings and announced it would increase its fiscal 2007 earnings guidance by $.05 per basic share for a second time due to the performance of its two major subsidiaries, New Jersey Natural Gas (NJNG) and NJR Energy Services (NJRES).The new guidance is set at a range of $2.95 to $3.05 per basic share and comes as NJR reports a 14.7 percent increase in earnings for the first half of its fiscal year.

Analysts had been expecting the company to earn $2.92 per share. For the current quarter consensus was at $2.19, and the company reported:

NJR earned $80.5 million, or $2.89 per basic share, for the three months ended March 31, 2007, compared with $60.2 million, or $2.16 per share, for the same period last year. Diluted earnings per share for the quarter increased 34 percent to $2.87, compared with $2.14 last year.

Apparently the earnings stream is quite volatile, likely impacted by seasonal utility usage. As the company explains:

“Normal” weather is based on 20-year average temperatures. Weather during the six months ended March 31, 2007 was 7 percent warmer than normal and 1 percent warmer than last year. Weather during the three months ended March 31, 2007 was 1 percent colder than normal and 12 percent colder than last year. As with the weather normalization clause which preceded it, the impact of weather is significantly offset by the recently approved CIP, which is designed to normalize year-to-year fluctuations on both NJNG’s gross margin and customers’ bills that may result from changing weather and usage patterns. Included in the CIP accrual was $8.4 million associated with the warmer-than-normal weather and $5.9 million associated with lower customer usage. Through the CIP, customers will realize annual savings of $10.6 million in fixed cost reductions. Additionally, the lower level of gas usage through March represents another estimated $27 million in commodity cost savings achieved by customers.

Funny we hadn’t thought about it before, but we never knew there was so much seasonal fluctuation for utilities.

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.