Best Transportation ETFs for Q3 2022
Transportation exchange-traded funds (ETFs) give investors exposure to a basket of stocks belonging to a broad range of companies in the transportation sector. The sector is composed of companies that build infrastructure, manufacture vehicles or other equipment, and provide services for the industry. This includes airlines, railroads, trucking, and logistics companies. Some notable companies in this sector include Delta Air Lines Inc. (DAL), CSX Corp. (CSX), and General Motors Co. (GM).
- The transportation sector has underperformed the broader market over the past year.
- The transportation exchange-traded funds (ETFs) with the best one-year trailing total returns are XTN, IYT, and FTXR.
- The top holdings of these ETFs are United Airlines Holdings Inc., Union Pacific Corp., and CSX Corp., respectively.
Transportation ETFs hold a large number of cyclical stocks because the transport of goods and people fluctuates with the economy, increasing when the economy grows and decreasing when it slows. These stocks have underperformed the broader market, with the benchmark S&P 500 Transportation (Industry Group) Index delivering a one-year trailing total return of -5.4% compared to 4.7% for the S&P 500, as of May 4, 2022.
Over the past year, the transportation sector has benefited from the reopening of the economy, the passage of the infrastructure bill by the U.S. Congress, and rising use of electric vehicles.
On Nov. 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act. The law allocates $550 billion toward improving America’s roads, bridges, water structure, resilience, internet, and more. The legislation will spend $11 billion on transportation safety programs, $39 billion on improving public transit, $66 billion on improving passenger and freight rail, $17 billion on improving ports, $25 billion on improving airports, and more in other areas of the transportation sector.
There are six transportation ETFs that trade in the U.S., excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM). The best transportation ETF, based on performance over the past year, is the SPDR S&P Transportation ETF (XTN). Below, we’ll look at the top three transportation ETFs as measured by one-year trailing total returns. All figures below are as of May 5, 2022.
- One-Year Trailing Total Returns: -9.0%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 1.08%
- Three-Month Average Daily Volume: 110,376
- Assets Under Management: $785.6 million
- Inception Date: Jan. 26, 2011
- Issuer: State Street
XTN aims to track the S&P Transportation Select Industry Index, which is designed to gauge the performance of the transportation segment of the broad U.S. equity market. The ETF provides exposure to air freight and logistics, airline, airport services, highway and rail track, marine, marine ports and services, railroad, and trucking companies. More than two thirds of the fund is composed of trucking companies and airlines. It follows a blended strategy, investing in a mix of value and growth stocks across the market-cap spectrum. The top holdings of XTN include United Airlines Holdings Inc. (UAL); Avis Budget Group Inc. (CAR); and American Airlines Group Inc. (AAL). The first and third of these are major domestic and international airline companies, while the second is the parent company of multiple rental car brands.
- One-Year Trailing Total Returns: -10.9%
- Expense Ratio: 0.41%
- Annual Dividend Yield: 0.73%
- Three-Month Average Daily Volume: 286,468
- Assets Under Management: $1.2 billion
- Inception Date: Oct. 6, 2003
- Issuer: BlackRock Financial Management
IYT seeks to track the S&P Transportation Select Industry FMC Capped Index (USD), which is comprised of a group of U.S. equities within the transportation sector. The ETF provides exposure to airline, railroad, and trucking companies within the U.S. Railroad companies receive the largest allocation within the fund, followed by air freight and logistics companies, and trucking companies. The fund follows a blended strategy of investing in a mix of growth and value stocks of companies with a range of market capitalizations. Its top three holdings are Union Pacific Corp. (UNP); class B shares of United Parcel Service Inc. (UPS); and CSX Corp. (CSX). The first and third of these are rail transportation companies and the second is a package delivery company.
- One-Year Trailing Total Returns: -11.8%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 0.57%
- Three-Month Average Daily Volume: 662,927
- Assets Under Management: $176.8 million
- Inception Date: Sept. 20, 2016
- Issuer: First Trust
FTXR tracks the Nasdaq U.S. Smart Transportation Index, an index composed of securities of companies within the U.S. transportation industry. The securities within the index are weighted based on the following three factors: volatility, value, and growth. The ETF provides exposure to a range of transportation companies, with railroads receiving the largest allocation, followed by trucking companies, auto parts makers, and more. The multi-factor-weighted fund follows a blended strategy, investing in a mix of growth and value stocks of various market caps. The fund’s top three holdings are CSX Corp.; Union Pacific Corp.; and PACCAR Inc. (PCAR), a manufacturer of trucks.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.