NEW YORK, Jan. 16, 2002 — Barclays Capital, the investment banking division of Barclays PLC, believes the New Year will generate opportunities in the energy, telecommunications and utility sectors.
According to Barclays Capital’s “US High Grade Corporate Bond 2002 Outlook,” a comprehensive in-depth look at more than a dozen major US industries, investors will consider rotating out of “defensive” sectors such as consumer products and aerospace.
“Fundamentally, we envision modest further credit deterioration, with profit margin pressures likely mitigating the improved economic outlook and investors continuing ‘risk aversion’ by seeking out defensive industries such as food, beverage, aerospace, and defense. However, renewed interest in some of the previously out-of-favor sectors, such as telecom, energy, and utilities, has begun to surface,” said Mark Pibl, Head of US High Grade Research, Barclays Capital.
As a sector, utilities, powers and pipes are not fundamentally improving, nor is the group dramatically cheap, even post-Enron; thus, Barclays is roughly market weight on the whole group.
Barclays is modestly overweight on the large cap pipes; the report considers them as cheap, with room to slowly tighten.
Barclays Capital is mostly bullish on the lowest quality generators, which have been beaten down. Although the generators are segmented into two groups, there is a positive outlook on both with specific emphasis on the +400 credits.
Fundamentals are strengthening, as OPEC begins to cut production and recommend mid-triple B credits. The outlook is favorable for major integrated companies, such as ConocoPhillips and Amerada Hess, and certain E&P credits, such as Devon Energy and Ocean Energy.
Barclays Capital is the investment banking division of Barclays PLC. Barclays Capital acts internationally as intermediary and adviser to corporations, financial institutions, governments and supranational organizations. For further information on Barclays Capital visit their website at www.barcap.com