Advantage Data: Builders, airlines, car dealers among week's worst in junk; some financials among best

By Paul Deckelman

New York, March 16 - More broad-industry sectors and sub-sectors were reporting negative bond returns for the past week than finished in positive territory for a fourth consecutive week, according to statistics supplied to Prospect News by Advantage Data Inc. - even as the overall junk bond market turned in a slightly positive return on the week and managed to edge back into the black on a year-to-date basis.

Among poorly performing industry groupings were such areas as residential construction, air transportation, copper mining and motor vehicle sales, while upsiders included financial-oriented segments such as mortgage bankers and commercial banks, as well as trucking companies and women's accessory and specialty stores. The recently hard-hit lodging sector also rebounded.

Of the 69 broad industry sectors into which Boston-based Advantage Data divides its high-yield universe, 46 showed declines in the week ended Friday versus 22 gainers and one sector showing neither a gain nor a loss. That continued the trend seen the week before when 50 sectors finished in the red, against 17 in the black, with two other sectors having flat readings.

Textiles, transportation lead losers

The worst-performing broad-industry sectors included textile manufacturing, off 5.03% on the week, especially its yarn and thread component sub-sector, which slid by 17.39%; air transportation, off 4.43%, pulled down to earth by the 7.08% loss in the sub-sector covering scheduled airline and air courier service; and furniture manufacturing, down 3.05%, with household furniture makers off 5.48%.

One of the big losers on the week was the residential construction sub-sector, which plunged by 13.18%. Other industries well on the downside included iron and steel foundries, off 12.88%, personnel services, down 12.41% - no surprise, given the overall economy's weak employment picture - and copper mining, down 8.55%.

Retailing continued to suffer from the economic downturn, including shoe stores, down 5.79%, family clothing stores, down 5.53%, motor vehicle dealers, down 5.52% and drug stores, down 3.80%. Even deathcare, usually thought of as a recession-proof defensive sector with no shortage of new customers, was off by 5.61%

The single worst-performing sector or subsector was miscellaneous industrial and commercial machinery, plunging 25.86% as manufacturing and capital spending continued to slow, with special industrial machinery not much better with a 15.92% loss.

Financials, lodging pace gainers

Despite the continuing credit crunch and the well-publicized woes of many banks and other financial companies, some financial areas were among those turning in the best bond returns in the latest week, the Advantage Data numbers indicated, particularly non-depositary institutions. The broad sector rose by 6.11% with its mortgage banking and mortgage brokerage sub-sector leading the way with a gain of 11.01%, followed by business credit institutions, up 6.02%, and personal credit institutions, up by 4.92%. The depositary institutions sector meantime returned 4.46% on the week, led by its commercial banking sub-sector, which rose 5.02%.

Apart from the financials, lodging - which had been the single worst-performing broad market sector in three of the previous four weeks - roared back into the black with a 5.32% gain. Other strong sectors were heavy construction, up 3.64%, transportation equipment manufacturing, up 3.11% - paced by motor vehicle and related parts and equipment manufacturers, who rose by 3.72% - and metal mining, up 2.80%, led by gold and silver mining with a glittering 4.57% gain.

The single-best sector or sub-sector showing was women's accessory and specialty stores, up 18.05%. Women's clothing stores rose a respectable 3.31%.

Motor freight transportation companies meanwhile kept on truckin' with a 10.11% gain. Non-ferrous metal foundries rose 8.43%, while miscellaneous publishing was ahead by 7.59%. Advertising, another recently hard-hit sector, rose by 3.17% on the week.

Fishing, pipelines still among year's best

On a year-to-date basis, the commercial fishing sector, despite a small loss on the week, remained the best-performing broad-industry group, returning 36.28% on the year, followed by energy pipelines, up 24.77%; restaurants 21.85%; forestry companies, up 15.14%, food stores, up 14.84%, miscellaneous manufacturing, up 13.39%, largely due to strong returns from companies making toys, sporting goods, jewelry and silverware, insurance agents, up 11.87%, and real estate, up 10.58%

Also strong year-to-date are movie theater operators, up 32.64%; producers of canned and frozen fruits and vegetables, up 20.76%; agricultural chemical companies, up 21.11%, and petroleum refiners, up 16.17%.

However, the best-year-to-date performance of any single sector or sub-sector belongs to iron mining, up 43.97% on the year.

Lodging still leads laggards on year

On the downside, lodging - despite its strong performance for the week, as noted - remained the worst-performing broad industry sector year-to-date, down 24.07%. Other weak sectors on the year included furniture manufacturing, down 17.95%, with household furniture makers leading the way downward with a 37.32% 2009 plunge, worsened by their poor showing this past week, and transportation equipment manufacturing, again despite a strong showing for the week, down 16.68% this year, with automotive manufacturing down 16.44% and aircraft manufacturing off 18.19%.

Other industry areas whose big weekly losses, already noted, caused their year-to-date deficits to widen included miscellaneous industrial and commercial machinery makers, down 48.61%, residential building, down 34.31%, and iron and steel foundries, down 30.99%.

Other sub-sectors showing big 2009 losses so far include men's and boys' suits and coats, down 79.43% on the year, the worst of any sector or sub-sector; metal forging and stamping, down 72.10%; refrigeration machinery makers, down 44.29%; foreign-based banks, down 34.20%; electronic component and accessory manufacturers, down 32.23% and personal credit institutions, down 26.66% on the year despite a solid showing on the week.

Market battles back

As of this past Friday, the overall domestic high-yield market, as measured by the widely followed Merrill Lynch High Yield Master II Index, was up by 2.11% from the previous week, clawing its way back into the black with a 0.35% year-to-date return, versus the previous week's 1.72% cumulative deficit.

The average Master II price of a high-yield issue stood at 60.38 as of the close on Friday, with a spread of 1,782 basis points over comparable Treasuries and a yield to worst of 20.00% - versus a price of 59.25, a spread of 1,843 bps and a yield to worst of 20.60% the week before.

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