Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investing in Specialized Transportation ETFs 2010

Companies / Exchange Traded Funds Jan 21, 2010 - 12:40 PM GMT

By: Ron_Rowland

Companies

Best Financial Markets Analysis ArticleToday I’d like to tell you about a sector that is deeply intertwined with economic recovery.

I’m talking about transportation.


We live in a mobile society, even if we are in the internet age. Not only do we move ourselves around, we also depend on quick, efficient transport to sustain our advanced economy.

Ever wonder how your neighborhood grocery store keeps fresh fruit and vegetables year-round? Transportation, that’s how. Food doesn’t just magically move itself from wherever it grows to wherever you are. Someone has to haul it — by truck, railroad, ship, or airplane. And even when you shop online, those purchased products must be delivered.

The economy depends on efficient transportation.
The economy depends on efficient transportation.

Now you can understand why transportation is a huge segment of the economy. And here’s where it gets interesting …

Transports: The Canary in the Coal Mine

Watching transportation stocks is a good way to keep an eye on the overall health of the economy. When demand starts to pick up, transport companies have to get busy moving stuff around.

Remember, a lot of stuff has to be moved before consumers actually buy it. That means the transportation companies are among the first to benefit from economic recovery. When the transports take off, there’s a good chance the rest of the economy won’t be far behind.

It works the other way around, too. When business slows down, merchants cut back their orders. Next thing you know, ships are sitting idle in ports and trucks are driving around half-empty. This is often apparent long before manufacturers and distributors see their own volumes drop.

So how can you play the transport sector? I have a suggestion for you …

Transportation ETFs

Exchange-traded funds (ETFs) offer a quick and easy way to get exposure to most market sectors. Transports are, I must say, a little bit underserved. Currently U.S. investors have access to only one broad transport sector ETF, and three more specialized offerings.

We depend on the trucking industry to keep grocery stores stocked with fresh food.
We depend on the trucking industry to keep grocery stores stocked with fresh food.

One reason for this is that stocks don’t always fit into neat categories. Consider Boeing (BA). They make airplanes that are used by transportation companies. But Boeing’s biggest customer, by far, is the U.S. government along with foreign military forces. So is Boeing a transport stock, a defense stock, or both? It’s not easy to say.

Most index providers classify the transports as a subset of the “industrial” sector. If you buy SPDR S&P Industrials (XLI), for example, you’ll have a piece of conglomerates like General Electric (GE) as well as transport stocks like FedEx (FDX) and Union Pacific (UNP). (You’ll have Boeing, too.)

If you want to zero in specifically on the transportation stocks, the best choice is iShares Dow Jones Transportation Average Index Fund (IYT). This is an ETF that follows the venerable Dow Transports index, which includes 20 of the top U.S. railroads, truckers, delivery services, airlines, and shipping companies.

Look at this weekly chart below of IYT and you’ll see what I mean about transports sometimes leading the larger economy. The shares topped out just below the $100 mark back in the summer of 2007, and have yet to move significantly above the point despite several attempts.

ishares

We know in hindsight, of course, that the U.S. economy entered a deep recession in the last quarter of 2007. The fact that IYT stalled out several months earlier was a good clue. Perhaps even more telling is that IYT started losing ground to the broader market a year earlier, in July of 2006.

And then last year transportation stocks lagged behind the major market indexes, a strong hint that the recession had not run its course.

Specialized Transportation ETFs

In addition to IYT, there are three ETFs that cover more specific niches within the transportation sector:

  • Claymore/NYSE Arca Airline ETF (FAA) holds airline stocks. This is a particularly volatile niche. Airlines regularly face vicious competition, rising fuel costs, and labor unrest. Yet these stocks can truly fly when conditions are right. Since its inception on January 26, 2009, FAA has lagged IYT, but it has started to come on strong the past six months.
  • Claymore Delta Global Shipping Index ETF (SEA) holds stocks from around the world that are involved in maritime freight transportation. SEA outperformed both FAA and IYT the past year and has been surging the last few weeks, but it is still far below its 2008 peak.
  • PowerShares Global Progressive Transportation Portfolio (PTRP) holds stocks that are involved in the quest for environmentally-friendly means of transportation. This excludes most of the large, well-known industry players. PTRP had the misfortune to be launched in late 2008 just as financial markets began to crater. But it has since recovered nicely.

Should you buy any of the transport ETFs right now? That’s for you to decide. But under the right circumstances, this sector can give you amazing results. So keep your eye on the transports.

Best wishes,

Ron

Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in