Advantage Data: Real estate, insurance lead junk outperformers; wholesalers, mining top laggards

By Paul Deckelman

New York, Sept. 21 - For a second consecutive week, bonds of almost all high-yield industry sectors had positive returns in the week ended Friday, with many showing gains of at least 2%, and some even above 4%, according to statistics supplied to Prospect News by Advantage Data Inc.

It was the fourth straight week in which the gaining sectors clearly dominated the losers, and it was the ninth week out of the past 10 - a stretch broken only by the decidedly negative performance seen in the week ended Aug. 21.

In the latest week, among the more significantly sized broad-industry sectors - measured by the number of issuers, the collective number of issues and the total face amount of bonds tracked - real estate was clearly the best gainer, with fellow financial sector insurance carriers next. Strength was also seen in such diverse areas as amusement services, electronics manufacturing and publishing.

For yet another week, there was no real downside among the major junk sectors - just industry groupings whose returns failed to match the more formidable gains seen elsewhere. The relative laggards included wholesale sellers of durable goods, metals mining and food stores.

Of the 70 broad-industry sectors into which Boston-based Advantage Data currently divides its high-yield universe, an overwhelming 69 showed positive returns in the week ended Friday, while just one, not a major sector, had a negative return - nearly identical to the previous week's breakdown of 68 sectors in the black and just two in the red, neither of them major groupings.

On a statistical basis, the junk market extended its stellar year-to-date performance, as measured by the widely followed Merrill Lynch High Yield Master II index, posting a gain that caused its year-to-date return to jump to levels near 47%, the peak reading for the year so far.

Real estate biggest gainer on week

The real estate sector led all of the significantly sized broad industry sectors in the week ended Friday, zooming 6.94%. It was real estate's fourth consecutive week among the leaders, including the previous week, ended Sept. 11, when it gained 2.45%, and it was the second week in the last three in which the sector has been the leader, including the week ended Sept. 4, when it led all major sectors with a 1.12% rise.

The insurance carriers sector (up 5.45%) was among the big leaders for a second straight week, including the prior week's 2.48% gain, and has now been in that elite group in four weeks out of the last five.

Other standout performers on the week included non-movie amusement services (up 4.17%), non-computer electronics manufacturing (up 3.93%), publishing (up 3.78%), non-depositary financial institutions (up 3.67%) for a second straight week among the leaders and lodging (up 3.22%).

'Downsiders' show modest gains

For a second consecutive week, no major sectors actually finished in the red, though several did show considerably smaller gains versus the other large sectors, such as durable-goods wholesalers, up just 0.49%, metals mining (up 0.69%), food stores (up 0.70%) for a second straight week among the weaker finishers and health services (up 0.98%).

Real estate leads on year

Advantage Data reported that among the significantly sized sectors, real estate - riding the crest of another strong weekly showing - continued to lead financial brokerages and exchanges on the year, by 177.15% to 101.99%. Electronics manufacturing showed a 76.21% return, while automotive services - mostly vehicle rentals - returned 62.61% on the year.

On the downside, no significantly sized sectors were in the red year to date. Depositary financial institutions showed a 13.90% return, the weakest major sector, followed by wholesale durable goods (up 18.36%).

Key market indicator extends gain

Looking at the overall domestic high-yield market, junk, as measured by the Merrill Lynch High Yield Master II Index, boasted a 2.71% one-week gain as of Friday, boosting its year-to-date return to 46.78% from 42.90% in the previous week.

The average price of a high-yield issue covered by the Master II stood at 89.67 at Friday's close, with a spread to worst of 793 basis points over comparable Treasuries and a yield to worst of 10.36% - versus a price of 87.40, a spread of 869 bps and a yield of 11.02% the week before.

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