Advantage Data: Most junk sectors firmer on week; real estate, auto manufacturing, gold mining among leaders

By Paul Deckelman

New York, March 23 - The high yield universe turned definitely firmer in the latest week, according to statistics supplied to Prospect News by Advantage Data Inc., with bonds of most broad industry sectors back in the black, some quite solidly. That represented a marked upturn after four consecutive weeks which had seen a clear majority of sectors finishing in the red.

Among the best-performing industry groupings were real estate, transportation equipment manufacturing - particularly automotive - metals mining, notably gold and silver, telecommunications and food manufacturing.

Among the few sectors sticking out on the downside were lodging, securities brokers and plastics manufacturing.

Of the 69 broad industry sectors into which Boston-based Advantage Data divides its high-yield universe, 57 showed positive returns in the week ended Friday, against just 12 negatives - a tremendous turnaround from the previous week, ended March 13, when 46 sectors finished in the red against 22 in the black, with one other sector showing neither a gain nor a loss.

Financials among firm finishers

The best-performing significant broad-market sector was real estate, up 7.11%, particularly the real estate agents component sub-sector, which jumped 13.26% on the week. Financial non-depositary institutions were also up handsomely on the week, returning 6.04% as a group, with all three of the component sub-groups firming smartly - mortgage bankers and brokers, up 7.15%, personal credit institutions, up 6.55%, and business credit institutions, up 5.67%.

Among deposit-taking institutions, commercial banks returned 2.41% to pace the whole sector.

Auto makers in high gear

Among the non-financials, transportation equipment manufacturing rose by 6.44% on the week, towed higher by the 7.57% jump in motor vehicle and motor vehicle equipment manufacturing, its biggest component sub-sector.

Other strong manufacturing sectors on the week included publishing, up 2.38% as book publishing gained 5.63%; food manufacturing, savoring a hearty 2.36% rise, including a 3.49% gain in its biggest component, meat processing; and electronics manufacturing, up an even 2.00%.

In the energy area, oil and gas production rose 1.79%, while electric and gas services returned 1.99%.

Mining rose by 3.40%, with gold and silver mining up a glittering 4.65%.

The whole telecommunications sector was strong, returning 3.27% on the week, with telephone operators jumping 3.89%, cable and satellite TV up 2.31%, and radio and TV broadcasting 2.20% better. Healthcare was up by a reasonably robust 1.32%.

Amusements, lodging lead losers

Among the relative handful of significant broad-industry sectors showing negative returns on the week, amusements - excluding movie theaters - was the worst, down 4.27%, while lodging finished well on the downside for the fourth time in five weeks, sliding by 1.44%.

Among the financials, the brokerage and exchange sector showed a bearish 1.25% deficit, with the securities brokerage sub-sector's 2.65% loss dragging it lower.

Other notable losers on the week included the plastics manufacturing subsector, down 5.81%, and oil and gas field services off by 1.44%, despite the strength the energy area otherwise showed. The single worst-performing significant sector or sub-sector was the paper industry's pulp manufacturing area, down 7.23%.

Real estate, petroleum refining up on year

On a year-to-date basis, real estate - one of the week's strongest performers, as noted - was also the best-performing significant broad-industry sector with a 15.84% 2009 return, propelled upward by the 25.02% cumulative gain in the real estate agents sub-sector.

Other strong major broad-industry sectors included food manufacturing, up 10.13% on the year, aided by a 22.57% gain in the bonds of canned and frozen fruits and vegetables; building, up 7.92%, particularly its operative residential builders sub-sector, up by 8.90%; healthcare, up 7.16%, with its important hospitals component ahead by 7.73%; and oil and gas, up 6.18%. The petroleum refining sub-sector was up by 16.58% on the year. The grocery retailing sub-sector returned 14.13% on the year.

Lodging, electronic manufacturing among worst on year

The lodging sector, already one of the week's worst performers, as noted, remains the worst-performing major broad-industry sector, with a 23.25% cumulative loss since Jan. 1.

Electronics manufacturing was down 17.07% on the year and its electronics components and accessories subsector off by 30.50%, despite decent showings for both on the week.

Among other manufacturers, the chemical sector is off by 6.27% year-to-date, pulled down by its plastics manufacturing component, down 21.51%, its loss deepened by its poor weekly showing. Transportation equipment manufacturing is down 4.77%, pulled down by the 16.66% nosedive in aircraft and aircraft parts manufacturing, which more than offset the smaller yearly loss for the larger automotive manufacturing sub-sector.

While some financial sectors enjoyed a rise on the week, they remained among the biggest year-to-date losers, including non-depositary institutions, down 4.77%, pulled down by the 20.41% plunge in personal credit institutions, which offset the 20.57% gain on the year notched by the mortgage bankers.

Depositary institutions were down 4.67% for the year, largely due to the 3.46% 2009 loss by its largest component, commercial banking, despite strong weekly showings by both. Insurance carriers were off 2.46% on the year, with an 8.18% year-to-date drop by marine and casualty insurers offsetting the 9.04% yearly rise by accident and health insurance companies.

Market builds on gains

As of this past Friday, the overall domestic high-yield market, as measured by the widely followed Merrill Lynch High Yield Master II Index, showed a 1.80% return on the week, fattening its year-to-date return to 2.16% from the previous week's 0.35% gain.

The average Master II price of a high-yield issue stood at 61.37 as of the close on Friday, with a spread of 1,754 basis points over comparable Treasuries and a yield to worst of 19.45% - versus a price of 60.38, a spread of 1,782 bps and a yield to worst of 20.00% the week before.

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