Barcap recommends high-yield portfolio strategies

Barclays Capital analysts posits four high-yield portfolio strategies in research published on Friday (15 May).

1. Maintain a material weighting to financial hybrids, as the sector’s index share almost doubled to 10.5% so far in 2009.
2. Stay short duration in credits with interest rate sensitivity and/or potential long-term fundamental changes. Examples include Peabody, Cablevision, L-3 Communications, and Iron Mountain.
3. Take advantage of the positive convexity of longer, low-priced bonds issued by high-beta credits. Limit the downside in case the issuer experiences a liquidity event, and maximise the upside should the issuer’s fundamental profile improve. Example credits are Dynegy and Sprint.
4. Overweight recommendations on the 11-17% yield segment of the market with respect to high-yield value. Example credits include Marquee Holdings, Cott Beverages, and Berry Plastics.