Advantage Data: Holding companies lead ongoing rally, coal miners off

By Paul Deckelman

New York, June 3 - The high-yield market recorded its 11th straight weekly advance last week, according to sector-tabulated weekly bond-performance statistics supplied to Prospect News on Tuesday by Advantage Data Inc.

Of the 57 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe, 52 finished in the black during the week ended Friday, while five sectors were in the red.

That represented an improvement from the more modestly positive trend seen the week before, ended May 23, when 49 sectors posted gains, while seven sectors showed losses and another two were unchanged on the week, showing neither a gain nor a loss. In the interim, Advantage Data recalculated and slightly contracted its overall sector roster.

A majority of the sectors have now been on the plus side in 20 weeks out of the 22 weeks so far this year, versus just two weeks in which more sectors were down than up - in the weeks ended Feb. 3 and March17.

A separate, more focused selection of just the 30 most significantly-sized sectors, as measured by the number of bond issuers, the collective number of issues tracked and their total face amount outstanding, continued to show strength this past week, with 29 of the 30 closing in the black, while only one finished in the red.

Those results were improved from the previous week's, when 26 of the sectors had shown gains, three showed losses and one was unchanged.

That more select grouping of the larger sectors generally moves up or down in tandem with the overall market, although from time to time there is a rare divergence, as happened during the week ended March 7, when those key sectors were down on the week while the overall sector roster showed more gains than losses. Those significantly-sized sectors have now mostly shown gains in 19 weeks since the start of the year, versus three downturns.

In the latest week, financial holding companies and other investment offices was the best performer among the significantly-sized sectors, while coal mining had the worst showing.

The electric and gas services sector moved back into the lead on a year-to-date basis, regaining it from the paper manufacturing grouping; the utilities have now held the top spot in three weeks out of the last four.

Coal mining remained down at the bottom on a year-to-date basis for a 13th straight week, and a 17h week out of the last 18.

Index extends gains

Statistical indicators of general market performance meanwhile, turned higher last week versus their levels the previous Friday, after having been mixed for two weeks in a row before that.

Among those indicators was the widely followed Merrill Lynch High Yield Master II Index, which posted an 11th straight weekly gain after two successive weekly losses in early March. It rose by 0.342%, following the previous week's 0.055% gain.

The index has now seen 18 weekly gains in 2014, against four losses. In 2013, the index showed 33 weekly gains against 19 losses, while in 2012 it had notched 40 gains and 12 losses.

As of Friday, the index's year-to-date return had risen to 4.742%, a new peak level for 2014. It was up from the previous Friday's 4.385% return. In 2013, the index had ended at 7.419%, its high point for the year, although that was well down from the 15.583% reading at which it had ended 2012.

Among its other components, the index showed an average price of 105.1176 on Friday, up from 104.8869 the previous Friday and a new high point for the year so far as well. The price meantime stayed well up from its low for the year so far of 103.24599, set on Feb. 4, and was up as well from 103.3161, where it had ended 2013.

Its yield-to-worst stood at 5.13% on Friday, down from the previous Friday's 5.16%, though still above its lowest level for the year so far, the 5.111% set on May 14. All of those levels were well down from the index's high yield for the year of 5.735%, set on Feb. 4, and down as well from 5.671% at the end of 2013.

The index's spread-to-worst over comparable Treasury issues stood at 393 basis points on Friday, a little tighter than the 394 bps seen the prior Friday, and wider than its tightest level seen so far this year, the 383 bps recorded on April 3 and again on April 22. But the spread was well in versus its wide point for the year so far, 444 bps, set on Feb. 4, as well as the 418 bps spread seen on the last day of 2013.

Holding companies head higher

Back on a sector-by-sector basis, Advantage Data meanwhile showed the bonds of financial holding companies and other investment offices having risen by 0.54%, the best of any of the significantly-sized sectors.

Also showing strength this week were depository financial institutions (up 0.50%), electric and gas utilities (up 0.42%) and the primary metals processing and telecommunications sectors (both up 0.40%).

In an unusual occurrence, none of those best performers had been on the previous week's Top Five list of elite finishers.

On the downside among the key sectors in the latest week, coal mining again did the worst, with a 1.24% loss, although that was the only large-sized sector ending in the red.

The remainder of the Bottom Five list of worst-performing sectors was filled out by names registering far smaller gains than their peers - lodging (up 0.02%), petroleum refining (up 0.03%), wholesale durable goods distributors (up 0.09%) and industrial machinery and computer manufacturers (up 0.10%)

It was coal's third straight week among the worst performers, having been there the previous week with a 0.54% loss and a paltry 0.03% gain the week before that, ended May 16. However, lodging had been the single best-performing sector the week before, with a 0.73% gain.

Utilities regain YTD lead

With 22 weeks in the books for 2014 so far, the electric and gas utilities sector improved by two positions to lead all of the significantly-sized sectors on a year-to-date basis with a 7.42% return.

It was the utilities' third week in the top spot out of the past four; after having been at the summit for two straight weeks, they had fallen two notches to just third-best during the week ended May 23, temporarily dethroned by the paper manufacturing sector.

Meantime, the papermakers (up 6.86%) slipped by one slot to fall into the runner-up spot.

Petroleum refining (up 6.10%) eased to third-best, after having been second-best the week before.

Printing and publishing (up 5.47%) was the fourth-strongest major sector for a fourth straight week, although it finished in a tie with food manufacturing (up 5.47%), which had not been among the year-to-date leaders the week before.

On the downside, coal mining (down 1.47%) continued to languish at the bottom of the pile as the absolute worst performer among the major sectors year-to-date for a 13th straight week and for a 17th week in the last 18. It remained in the red for a second straight week after two weeks of barely showing a gain for the year so far, which in turn had followed an eight-week stretch, from the week ended March 14 through the week ended May 2, during which it had also posted cumulative losses each week.

Also among the underachievers, the financial brokers, dealer and exchanges sector (up 2.83%) declined to second-worst from just fifth-worst the week before.

Miscellaneous retailing (up 3.19%) was third-worst among the major sectors for a second consecutive week.

Real estate (up 3.27%) improved to just fourth-worst, after having been second-worst for five straight weeks before that.

Automotive services (up 3.28%) likewise improved by one notch to just fifth-worst, after having been fourth-worst for two straight weeks before that.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.