Transportation ETFs offer investors the opportunity to invest in various stocks from various transportation-related companies. The industry comprises firms that construct infrastructure, make vehicles or other equipment, and offer services to the sector. This includes railroads, airline transportation, logistics, and trucking companies. Some noteworthy companies in this area comprise Delta Air Lines Inc. and General Motors Co.
Transportation ETFs own a huge number of cyclical stocks because transportation of people and goods fluctuates according to the economic situation, growing as the economy expands and decreasing as it slows. They have not performed as well as the overall market and are the most popular S&P 500 Transportation Index delivering a one-year total return trailing the last year of -5.4 percent, as against 4.7 percent in the S&P 500, as of May 4, 2022.
In the last year, the transportation industry has profited from the opening of economic activity, the adoption of the bill to improve infrastructure by U.S. Congress, and the increasing use of electric automobiles. There are six ETFs in the transportation sector trading in the U.S., excluding inverse and leveraged funds and those under $50 million funds under management.
SPDR S&P Transportation ETF (XTN)
XTN seeks to follow its goal of tracking the S&P Transportation Select Industry Index, which is intended to measure how the transport sector of the larger U.S. Equity market. The ETF offers exposure to air cargo, logistics, airlines, airport services, railroad tracks, highway and marine, ports for marine and services, railroads, and trucking firms. Over two-thirds of the fund is comprised of companies that transport and airlines.
It is a hybrid strategy that invests in a mix of growth and value stocks from the market cap range. The top stocks of XTN comprise United Airlines Holdings Inc., Avis Budget Group Inc., and American Airlines Group Inc. The first and third are significant international and domestic airlines, and the second one is the parent company for multiple rental automobile brands.
iShares U.S. Transportation ETF (IYT)
The ETF gives exposure to airlines as well as railroad and trucking companies in the U.S. Railroad companies receive the biggest portion of the fund and are followed by air freight and logistics firms, as well as trucking companies. The fund employs a blended strategy that invests in an assortment of value and growth stocks of companies with various market capitalizations. The three largest holdings it has to include Union Pacific Corp. Class B-shares that belong to United Parcel Service Inc. and CSX Corp. The three are railroad transportation companies, and the third is a company that delivers packages.
First Trust Nasdaq Transportation ETF (FTXR)
FTXR is a part of its Nasdaq U.S. Smart Transportation Index the index is comprised of securities issued by companies that are part of the U.S. transportation industry. The securities in the index are weighted according to the following three elements: volatility, value, and growth. The ETF exposes a wide range of transportation firms, and railroads receive the most amount, followed by trucking firms, auto parts manufacturers, and many more.
Should You Add Transportation ETFs To Your Portfolio?
The most interesting aspect of transport is that even though the sector is essential to the economy, many businesses haven't been a long-term success. Subsectors like airlines or truckers are typically more cyclical, so the shares tend to fluctuate and flow in line with the economic cycle.
These kinds of sectors have a high potential for future growth. Still, the companies tend to have a turbulent performance and are ideal for ETF investing since it offers an investor exposure to larger trends without the dangers associated with picking out particular winners. The world needs efficient transportation systems. The potential of the technology can transform vast portions of the transport economy over time. A transportation ETF allows investors to ride for the ride while taking the risk of purchasing an unreliable lemon.
