Advantage Data: Junk sectors post second straight gain following four-week losing streak

By Paul Deckelman

New York, Dec. 5 – The junk bond market made it two straight weeks on the upside last week (ended Dec. 2), after having decisively broken out of its recent rut the week before (ended Nov. 25) by posting its first upturn after four straight weeks before that on the slide, according to the latest sector-tabulated bond-performance statistics supplied to Prospect News on Monday by Advantage Data Inc.

Those four weeks of losses followed five straight weeks of gains before that, lasting through the week ended Oct. 21.

In the latest 10 weeks, dating back to the week ended Sept. 30, there have been six weeks of gains, balanced against four weeks of losses.

On a somewhat longer-term basis, in the 48 weeks since the start of the year, gainers have dominated in 35 of those weeks, versus 13 weeks in which more negatives were seen.

A subset consisting of the 33 largest sectors (out of the total of 61 broad-industry sectors into which Boston-based Advantage Data currently divides its entire high-yield universe), as measured by the number of bond issuers, the collective number of issues tracked and their total face amount outstanding, showed 28 of those bigger sectors finishing in the black last week, versus just five sectors that ended in the red, essentially extending the pattern of strength seen during the Nov. 25 week, when 30 of those key sectors had shown gains, versus only three sectors posting losses.

The most recent two weeks represent virtually a complete reversal from the week ended Nov. 18, when 29 of the sectors had ended in negative territory, versus only three sectors ending on the plus side, as well as one unchanged sector showing neither a gain nor a loss on the week.

Among specific large-sized sectors last week, coal mining posted the biggest gain after having been the previous week’s worst large-sized performer, while chemical manufacturing was the biggest weekly loser.

Coal was the best year-to-date performer for a second straight week and on a longer-term basis for seven weeks out of the last nine.

Chemical manufacturers, in line with their weekly downturn, fell to the bottom of the pile as the worst year-to-date performer so far.

Coal climbs back

Coal mining, as noted, turned in the strongest performance last week of any large-sized sector, rising 2.82% on the week.

It thus accomplished the relatively unusual feat of going from worst to first, having been the single-worst-performing large sector during the week ended Nov. 25, when it fell by 0.77%.

Also showing strength during the latest week were oil and gas extraction (up 2.45%), energy exploration and production (up 2.16%), oilfield services (up 2.03%) and petroleum refining (up 0.80%).

It was the third straight week among the Top Five strongest-finishing sectors for both O&G extraction and for energy E&P, which had each been there the week before with gains of 1.03% and 0.69%, respectively. Oil and gas extraction had, in fact, been the best-performing large-sized sector during that Nov. 25 week.

Chemical makers mauled

On the downside, chemical manufacturing was the worst-performing large-sized sector, losing 1.18% on the week.

The sector includes pharmaceutical companies such as Valeant Pharmaceuticals International, Inc., whose bonds took a hit as the Canadian drugmaker ran into problems with a planned asset sale, whose sizable proceeds could have gone to debt-cutting.

Other sectors showing losses on the week included health care services (down 0.94%), electric and natural gas utilities (down 0.28%), paper manufacturing (down 0.17%) and building construction (down 0.08%).

It was the second straight week among the Bottom Five worst-performing weekly sectors for the papermakers, who had been there the prior week with an anemic 0.05% gain.

The utilities have now been among the Bottom Five in two weeks out of the last three and in three weeks out of the last five.

Coal still best on year

Coal mining remained clearly the best year-to-date performer among the large-sized sectors for a second straight week and a seventh week out of the last nine, with a 103.27% cumulative return.

It was followed by metals mining (up 67.11%), energy E&P (up 40.18%), oil and gas extraction (up 38.07%) and primary metals processing (up 31.63%) – the exact same 1-to-5 order seen the week before.

Chemical makers worst on year

Chemical manufacturer, the week’s worst finisher, as noted, also fell to the bottom of the year-to-date rankings with just 4.00% return on the year.

Other underperformers were health care (up 4.26%), automotive services (up 5.42%), precision instrument manufacturing (up 6.43%) and depository financial institutions (up 7.26%).

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