 |
| Ming Shao |
DuPont Capital Management sees value in the auto and auto supplier sector, according to Ming Shao, senior portfolio manager of over $500 million in high yield in Wilmington, Del. "At the end of [May], General Motors Acceptance Corp. was at more than 9% yields, which is more than most high-yield names," he explained, noting Ford Motor Co. paper is also attractive. Shao anticipates both GMAC and Ford will return to investment-grade land but thinks General Motors upgrade prospects are not as promising as Ford's are. DuPont is overweight the auto sector relative to its benchmark, the Lehman Brothers High-Yield Index, but Shao declined to quantify the overweight. Among auto suppliers, he sees value in Delphi Corp.'s '06 paper. "That feels pretty secure. It very much depends on specific issues and maturity dates," he explained, adding he expects volatility among the auto suppliers to continue. Shao added the Collins & Aikman bankruptcy filing was one of the few blow-ups of the last year, which he avoided.
Aside from the autos, Shao is avoiding double-B paper. "It's too tight and too close to investment-grade spreads, which are rich," he explained. DuPont does not have a real underweight to the higher quality sector because of its auto positions, but Shao sees value in triple-C names. Two of his best performing positions have been utilities Dynegy Corp. and Calpine. He is not looking to add further to those names. DuPont's average credit weighting is single-B plus.
Shao is currently sitting on 7-8% in cash and will selectively buy new issues. He noted his portfolio is always less than 10% in cash and he is comfortable with his current level. DuPont may add airlines to its portfolio because yields are so generous. "Fundamentally, we like the discounters like JetBlue but the prices are much better for risk on [names like] Delta," he explained. Shao said his decision to add depends on fuel prices, consolidation in the industry and pension legislation.
