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Here is my initial list of replacement candidates for the third quarter 2008 portfolio reshaping:

AA ACMR ACS ACXM ADP AEM AEO AET AFFM AHL AIB AINV ALL AME AN APA ARP ATWO AVID AVZA AXS AYR BAGL BCPC BDK BGC BHI BJS BKS BLL BP BRO BRS BSET CAM CBI CBK CCK CCRT CDNS CFI CKH CMI COG COLM COMS CPB CRDN CROX CSCO CSL CTB DD DELL DFG DLM DRYS DUK DVN EGLE ENH EP ETP FAST FCX FDRY FITB FLEX FLXS FRPT FRZ FSR FTEK FTO GFF GHM GIL GMT GNK HAIN HAL HAR HAST HCC HCN HCP HELE HK HLYS HNT HNZ HOC HON HRS HRZ HTH INFS IPSU IR IRE ISCA ISYS IVN JCI JNX JOSB KCI KEY KMX KOF LMC LPX LRCX LSTR LZB MAN MAS MCRL MGIC MHK MHP MI MKSI MOT MPS MPWR MWA/A MXGL MYE NBR NBTY NFX NG NM NRG NSHA NTGR NVS NWLIA OC OCR ODP OIS OKE OMAB ONNN ORI OSK OXY PAYX PBI PBY PCZ PHX PKD PKI PPC PPG PRE PRU PTEN PVA PWR PXP PZZA RCII RDC RDK ROP RS RTN SAFM SCX SENEB SFY SGIC SGY SI SII SJM SKM SKX SLB SLGN SNDK SNG SNX SNY SPSS STZ SVR SVU SWN TECUA TEX THOR TLK TMS TPX TRMA TRN TRV TSC TSO TTC TXT UNF UNT URI USU VE VLGEA VLTR VZ WAG WDC WFT WGOV WNC WRB WTI WTIU WTM WY XEL Y ZNT ZZ

Quite a melange, huh? Well, my quantitative techniques will winnow the list down. At this phase in the cycle, I am likely to lower my weights that I apply to future earnings. Profit margins are declining in many places.

The second quarter was good for me on a relative basis, though being away from home, I suspect I am off a tiny amount in the first half, and that I was a little ahead of the S&P 500 in June. The first two days of the quarter have not been kind, either. Well, the quarter is young, and we have a lot of the year remaining. The market is short-term oversold by my oscillator. When I have opportunities I add a little here and there.

Over the long weekend, I should post the results of my industry and country screens. I might begin my quarterly reshaping while on the road. Pretty amazing what one can do with a PC, the Internet, and Bloomberg out in the middle of nowhere.

I try to ignore short term market moves, and just focus on what I have done well with in stock-picking. Usually that ends up working well for me, though one can never tellwhat the future will hold. No stock-picking method is perfect. I try to make mine a little better by structuring my process highly, making fewer decisions, and making the structure of my decisions easier. I don’t have to choose the best stocks, just a few stocks that will do better than the stocks that I am selling. Keep repeating that formula, and the results can be quite good.

If you have other replacement candidate ideas, please feel free to pass them on to me and the rest of the readers. I usually throw them into the mix, and sometimes I buy one of them.

Source: Replacement Candidates for David Merkel's Portfolio: From AA to ZZ