Bargain Shopping Over In Consumer Products? Analyst, PM Weigh In

  • 01 Dec 2002
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A sell-side analyst continues to see opportunities for total return investors in high-yield consumer products, but a portfolio manager sees the sector as fairly valued. George Chalhoub, analyst at Deutsche Bank and the top-rated consumer products guru on the 2002 Institutional Investor All-America Fixed-Income Team, is maintaining his buy on the sector in spite of recent sizeable gains. Among his top recommendations are Salton Inc, maker of Farberware, the George Foreman grill, and the Scooby Doo shower radio, among other products, and Samsonite. Salton's 10.75% notes of '05 (B2/B) were bid at 97.5 last Tuesday, up from 89 roughly a month ago. Chalhoub says the bonds should trade at 102 or 103. Samsonite's 10.75% notes of '08 (Caa2/CCC) were up to 82 from a 73 bid over the same period. Chalhoub sees the high 80s as fair value for the bonds. "The consumer has not retrenched as much as people thought, and from a credit specific standpoint these companies came into the second half much better prepared for low demand than people gave them credit for--both from a cost standpoint and in terms of inventory management," he says.

Mark Durbiano, high-yield portfolio manager at Federated Investors in Pittsburgh, says the sector, filled with smaller companies that have a limited range of products, used to be better value a couple of years ago. "The ones we own are fairly valued. They have gone from being dirt cheap and a driver of performance to being coupon clippers." Among those are the Armkel 9.5% notes of '09, which were bid at 108 last Tuesday, and the Chattem 8.875% notes of '08 which were at 103. Durbiano says he does not follow Samsonite or Salton very closely, but acknowledges that there may still be a few credits with room for appreciation.


  • 01 Dec 2002

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Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Citi 7,171 21 10.72
2 Bank of America Merrill Lynch (BAML) 6,901 20 10.32
3 JP Morgan 4,776 10 7.14
4 Credit Suisse 4,718 9 7.05
5 Lloyds Bank 4,420 14 6.61

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1 Wells Fargo Securities 68,611.22 170 11.38%
2 Bank of America Merrill Lynch 59,056.08 169 9.80%
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4 Citi 56,521.05 165 9.38%
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