In the first round of triage I went through the first third of my portfolio. Now is the time for the second third; definitely a more positive experience, together with my changes on the first third, after further reflection.
The Dead ? Companies with bad balance sheets, but have been whacked so bad that it is still worth playing

• Jones Apparel
• Deerfield Capital

If they rally a lot more, I am out.

Walking Wounded ? Companies with okay balance sheets that we feed more cash to

• Lafarge
• Industrias Bachoco
• YRC Worldwide [moved from The Dead]

Seemingly healthy that might have financing problems ? Sold

• Lithia Automotive
• Group 1 Automotive

Uncertain as of yet

Sara Lee

Don’t know what to do here. Balance sheet has issues but profitability is improving as the turnaround progresses.

Healthy companies that we leave alone

• Barclays plc (Moved from Uncertain as of yet — Capital levels are seemingly adequate.)
• Deutsche Bank
• Mylan Labs
• Cimarex Energy
• Nam Tai
• Arkansas Best
• Bronco Drilling
• Vishay Intertechnology
• Aspen Holdings
• Safety Insurance
• Lincoln National
• Assurant

Safe New Names Bought

• PartnerRe
• National Atlantic [Did not get a full position on, was too stubborn about levels… not buying here.]

So, there’s the triage with one third to go — I have not done the companies with my largest gains, which I presume to be in better shape. At this point, I’m relatively happy with what I have.

PS — As to my methods, the main parts are reviews of the balance sheets and cash flow statements. It’s basic bond analysis, asking how likely it is that future cash flows will be able to cover the debts in question. At present, I am looking to hold companies that can survive a crisis. With the reservations noted above, most of this portfolio can do so.
Full Disclosure: Long JNY DFR LR IBA YRCW SLE BCS DB MYL XEC NTE ABFS BRNC VSH AHL AIZ LNC SAFT PRE NAHC