Transportation ETFs

Average returns in this Category	3 months return	6 months return	12 months return	YTD return

Transportation	12.13%	56.84%	-31.15%	18.56%

Ticker SPY	Name	3 months return	6 months return	12 months return	YTD return

SEA	Claymore/Delta Global Shipping Index ETF	0%	53.89%	-43.09%	23.44%

PTRP	Global Progressive Transportation Portfolio ETF	18.59%	72.96%		43.73%

IYT	iShares Dow Jones Transportation Index Fund	24.26%	59.79%	-19.22%	13.68%


	About Transportation ETFs
Transportation ETFs Overview and forecast The transport business is hyper-competitive at the best of times. Now, with diminishing business, the competition is between corporations in a shrinking market. The transportation industry, particularly heavy freight, has been severely affected by the drastic drops in orders. That's hit both their bottom line and made a bad situation noticeably worse for the corporations who've been trying to deal with shrinking margins. The Transportation ETFs have been slugged, in terms of value, as the economy has contracted. For the Transportation ETFs, that's hit values, quite hard. A quick look at the basic charts will show a bumpy decline to the end of the March 2009 quarter, with a bit of a bounce after that. Some ETFs have gone from $100 to $40 back up to about $60, but that sort of performance is hardly a recipe for feeling secure. The Transportation ETFs have a further problem. Only one of them, iShares Dow Jones Transportation Index Fund, has been around for any length of time. The others are new, and started up pretty much when the markets started to nosedive. That makes assessment more difficult. As trading stocks, they're interesting in terms of margins from their low points. That nearly 50% rise from their low values is respectable, in two relatively short periods. The volumes for iShares Dow Jones Transportation Index Fund (Ticker IYT) are pretty good, and the ETF has obviously been popular with traders, with millions of units changing hands, so there's no lack of trader interest. The other Transportation ETFs trade in thousands of units, although some big spikes in volumes are noticeable. As investment stocks over time, not a lot has been proved by their performance to date. They've gone with the indices over the cliff, and started to rise with the indices. That's a relatively "Ho Hum" performance in terms of the top of the market, but for those working on trades, not uninteresting. Noticeable among the various indicators is the fact that IYT's chart from mid 2008 is a virtual mirror image of Fedex's stock performance over the same period, despite the fact that IYT only has an 8.82% element of Fedex in its holdings. This is actually an indicator of basic value. Over time, it's fair to assume these transport sector stocks won't merely drift, and nor will the Transportation ETFs. There are some very big qualifiers to projecting anything in the transport industry, but the major league transport corporations are considered pretty strong. They even survived the bizarre oil prices of the 2007-2008 period. Short term (6 months) The transport sector can be considered surgically attached to its client base. No miracles are expected in 2009, although some reasonable improvement will occur as new business kicks in over time. Some sector rationalization might happen, too, with minor transport corporations being absorbed or folding, and sending their business to others. The Transportation ETFs are more appealing as trading prospects in the short term than as investments. Serious traders seem to be taking a liking to ETFs generally, and the performance of the Transportation ETFs is more of an indication of trader interest than sector performance, which has been uninspiring, at best. There's also a "position" element to be considered, where investment funds may consider it worth picking up the Transportation ETFs well below their peak prices. Mid term (2 years) Mid term, the investment funds would be right to pick up a position with the transport index ETFs. When trade returns to normal, as it eventually must, these ETFs will pick up significant value, if they have their holdings in order. The investment market itself is going to be a factor in the evolution of the Transportation ETFs. The current batch of Transportation ETFs isn't really much of a reflection of investment potential. Like some other sectors, transport hasn't really had a lot of attention from the funds which create ETFs. The likelihood is that over time there will be many more, and more diverse, Transportation ETFs. In the present economic climate, obviously, people aren't going to be starting too many new funds, but in time, possibly within the two years, they will. Long term (5 years) In five years, the Transportation ETFs will definitely have moved out of prairie league status into major corporate investment territory. To perform, that's what's needed. ETFs need capital to develop, and the investment market likes to have choices. So ETFs generally, and particularly the under developed sectors, like the Transportation ETFs, have a long way to go. Investors are however advised to check out the qualifiers, in terms of Transportation ETFs. There are good prospects, but plenty of possible turkeys, too. Qualifiers to projections The trouble with the transport sector is its long list of vulnerabilities. Any and all predictions must start with these issues. Anyone involved in the industry can give you a saga of difficulties, from fuel prices, to capacity, to the state of roads, to overheads. Those are just the basics. Good, high performance stocks in transport tend to be those where the culture is good, the client base is healthy, and nobody mentions the word "debt" a lot. Obvious as that might sound, the entire transport sector is composed of moving parts, in terms of capital and costs, and they all have to be moving well. Maintenance alone is a major factor in transport. Carrying capacity, schedules and basic distribution issues are some of the others. Investors and traders alike need to know the danger signs, and not just read the NAVs. Think "US airlines", and you'll get some idea of how sensitive the transport industry can get, even during a boom period.

Last Updated on: 2010-01-14 02:03:40

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