Transportation of goods and materials is an important fundamental part of our economy. As crucial as this industry is and with all the competitive ways to fulfill this need to move good, mixed results have been experienced by average investors. The various segments of transportation include railroads, trucking, airlines, freight forwarders, warehousing, and many more. Finding investment opportunities in such companies has been hampered by the cyclical nature of the industry as well as the economy. Here are three ETFs, each with a unique perspective, that seem to have similar performance characteristics.
The SPDR S&P Transportation ETF (NYSEMKT: XTN) is designed to replicate the S&P Transportation Select Industry Index. The inception date of Jan 2011 makes this newcomer hard to analyze without more performance history. XTN holds 41 stocks and the largest position is Genesee and Wyoming Inc. (NYSE: GWR), with 4.1% of the fund in this stock. Operating expense ratio is listed as 0.35% the portfolio does not rebalance. Returns appear to be positive for the short reporting period. A close look of all the stocks held is what will determine if XTN belongs in the portfolio. More details on getting this data can be found on https://www.spdrs.com/product/fund.seam?ticker=XTN
The iShares Dow Jones Transportation Average Index Fund (NYSEMKT: IYT) seeks to follow the Dow Jones Average Transportation Average Index. There are 21 stocks held in IYT and the largest holding is Union Pacific Corp (NYSE: UNP), with 12.89% of the fund in this issue. The start date of IYT was Oct of 2003 and the track record will give a better sense of how this ETF will perform in various market conditions. 2008 was a bad year of IYT, yet when compared to other investments, the relative returns analysis will be in favor of this ETF. Operating expenses are at 0.47% and details on the portfolio composition and other facts can be found on http://us.ishares.com/product_info/fund/overview/IYT.htm
The Guggenheim Airline ETF (NYSEMKT: FAA) seeks to match the NYSE Arca Global Airline Index. FAA holds 26 securities and the top holding is Delta Airlines (NYSE: DAL), with 15.43%. The top three positions have a total weighting of 45.61%, with 15.38% going to United Continental Holdings (NYSE: UAL) and 14.8% in Southwest Airlines (NYSE: LUV). FAA is clearly influence by these three airline stocks. Start date is Jan of 2009 and the operating expense ratio is 0.70%. The returns history for this short period does make FAA worth a good look. As challenging the airline industry is with all the factors that affect it, FAA is subject to such events hitting one of the top three stocks. These potential risks must be well understood before taking a position in this ETF.
The various fundamental factors that influence all companies that compete in the transportation industry will always be present. When the investor finds companies that are on a solid foundation and are strong enough to endure all the cyclical factors of this industry, then building a position may enhance the overall portfolio. Should such findings be part of an index and a sponsoring ETF has these in the top holdings reports, then getting the additional diversification from the other stocks will help. In essence, this is an industry that should be researched and purchased based on bottom-up analysis; stocks first, then packaged products.
Jeffrey L (Jeff) Stouffer is associated with Kingsview Asset Management, LLC and manages the Alexandria Virginia office. He has earned the privilege of using the CAIA and CFP® marks and holds several FINRA licenses. As a practicing financial advisor serving the needs of individual and owners of businesses, he believes in using a wide range of strategies including alternative investments. For additional information, he can be contact via email at jeff.stouffer@kingsviewassetmanagement.com
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