Advantage Data: Electronics producers, business services lead junk rally; food stores weak

By Paul Deckelman

New York, Aug. 3 - Bonds of most high-yield industry sectors once more produced strong returns in the week ended Friday, according to statistics supplied to Prospect News by Advantage Data Inc. - the third straight week in which most sectors finished in solidly positive territory, as junk pulled further away from its previously choppy, inconsistent pattern.

In the latest week, among the more significantly sized broad-industry sectors - as measured by the number of issuers, the collective number of issues and the total face amount of bonds tracked - manufacturers of non-computer electric and electronic equipment led all such sectors for a third consecutive week, with the business services sector as the runner-up for a second week in a row. Machinery and computer manufacturing and non-movie amusement services also showed notable strength.

For a third straight week, there were relatively few losing sectors overall. And, unlike the previous week, there were none at all among the significantly sized industry groupings, although several sectors continued to show only relatively meager returns, including food retailers and insurance carriers.

Of the 70 broad-industry sectors into which Boston-based Advantage Data divides its high-yield universe, 68 showed positive returns in the week ended Friday, while just two had negative returns.

It was the third straight week in which considerably more sectors finished in the black than ended in the red - the tally in the previous week, ended July 24, had been 66 to four, respectively - and the fifth week in the last six in which the positive sectors have led.

On a statistical basis, the junk market continued its winning ways, with the widely followed Merrill Lynch High Yield Master II index posting another robust gain for the week to lift its year-to-date return above the 37% level.

A hat-trick for electronics makers

For the third consecutive week, manufacturers of non-computer electronic equipment had the best return of any significantly sized broad-market sector, the bonds of such companies jumping 5.20% on the week. That followed the 4.88% advance seen in the previous week, ended July 24, and the 2.82% gain seen the week before that, ended July 17.

The business services grouping was second-best among the major broad market sectors for a second straight week with a 5.03% gain, on top of its 4.73% bulge the previous week.

Other strong performers in the latest week included makers of machinery, including computers and office machines, up 3.22%, and non-movie amusement services companies, up 3.14%.

Among other manufacturers doing well were transportation equipment (up 2.68%), publishers (up 2.17%) and chemicals (up 2.11%). Gas and electric utilities gained 2.07%. Building construction rose 2.23%, with real estate ahead by 2.20%. Another financial grouping, non-depositary institutions, gained 2.05%. Lodging was 2.17% better, and miscellaneous retailing was 2.05% ahead.

Food stores, insurers lag

None of the significantly sized sectors finished in the red this past week, although several had mediocre showings, failing to break the 1% mark for weekly returns - food stores (up 0.79%), financial brokerages and exchanges (up 0.88%) and insurance carriers (up 0.98%).

The insurers and food retailers had also been among the worst performers the previous week, with a 0.89% loss and a measly 0.50% gain, respectively.

Brokerages still lead on year

Advantage Data reported that despite its tepid weekly showing, the financial brokerages sector remained the biggest major-sector gainer on a year-to-date basis, up 97.64%.

Electronics manufacturing rode its third sizable weekly gain to a 56.33% cumulative return, while automotive services was up 56.30%. Several sectors topped 40% year to date, including real estate, business services, metal production, chemical makers and transportation equipment manufacturing.

On the downside, no significantly sized sectors were in the red year to date. Only one - depositary financial institutions - was in the single-digits on a percentage basis, at 5.77%.

Market rolls on

Looking at the overall domestic high-yield market, the Merrill Lynch High Yield Master II Index, junk - which had a 2.54% rise in the previous week - maintained that momentum in the week ended Friday, notching a one-week return of 2.63% to lift its year-to-date return to 37.36% from 33.84%.

The average price of a high-yield issue covered by the Master II stood at 84.47 at Friday's close, with a spread to worst of 913 basis points over comparable Treasuries and a yield to worst of 11.70% - versus a price of 81.86, a spread of 971 bps and a yield of 12.31% the week before.

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