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.