Convertibles drop in April but still beat equities, Salomon says

By Peter Heap

New York, May 2 - The convertibles market declined in April, giving up the momentum established in March, but still managed to outpace most major large-cap stock indexes, according to Salomon Smith Barney analyst Adrian Miller.

Convertibles recorded a loss of 1.4% in April, compared to a 3.2% rise in March, leaving the year-to-date performance at a 2.35% decline.

But convertibles were ahead of the S&P 500, which fell 6.06% in April for a year-to-date loss of 5.80%, and far outperformed the Nasdaq, which gave up 8.51% in April for a year-to-date drop of 13.46%. While convertibles beat the Dow Jones Industrial Average in April - it slipped 4.31% - they are behind for the year through April, with the Dow only down 0.24%.

Convertibles in the Salomon index are also ahead of the stocks that underlie those securities; they dropped 6.79% in April for a year-to-date fall of 12.41%.

In a report on the month's performance, Miller noted that the downside in convertibles was buffered by the largest sector, consumer cyclicals, which make up 23.4%. This group only fell 0.73% in the month and is only behind 0.79% year to date.

The top performing sector in the month and the year so far is capital goods, which was up 2.77% in April and 16.95% so far in 2002.

On the other hand, telecom at 12.1% of the index and technology at 18.1% were "dreadful," Miller said. Technology dropped 2.84% in the month for a 2.33% loss year to date while communication equipment and services declined another 3.83% in the April for a 14.28% year to date drop.

Among individual securities, the top performer so far this year is Providian Financial's 0% due 2021 which has returned 80.1%. Second place goes to PRG-Schultz International's 4.75% of 2006 with a 57.0% performance while another Providian issue, the $3.25 of 2005 is at number three, also with 57.0%. Hexcel Corp.'s 7% of 2003 with 51.2% and American Retirement's 5.75% of 2002 with 44.0% round out the top five.

In the other direction, there are few surprises: WorldCom takes three out of the bottom five places while Adelphia Communications and Tyco International complete the list. Losses range from 66.4% to 73.3% for these securities.

© 2015 Prospect News.
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