As the global economy picks up, you should be very interested in shipping exchange traded funds (ETFs). Why? Because one, shipping and global trade go hand-in-hand, and two, diversifying across the sector through an ETF should help you sleep at night, especially as the European credit crisis remains uncertain.
Until the shipping ETF came along, investors did not have a good choice for investing in a shipping fund. The only available options were the iShares Dow Jones Transportation Average Index Fund (IYT) or the Fidelity Select Transportation Fund (FSRFX), reports Don Dion of the Street. However, within these funds, the shipping industry only accounts for 9% and 0.3%, respectively.
The Claymore Shipping ETF (NYSEArca: SEA), which was resurrected on June 11 after being forced to close in April due to a legal mishap, finally came along to give pure exposure to this sector. The mishap occurred because not enough shareholders approved a new investor advisory agreement after Guggenheim Partners purchased Claymore in late 2009. [Claymore’s SEA Is Back!]
The resurrected fund tracks the same index as its predecessor- the Delta Global Shipping Index. Its top holdings are: Pacific Basin Shipping, Overseas Shipholding, Navios Maritime Partners and Ship Finance International.
Although investors may want to be as far away as possible from any equities related to Greece, SEA has no choice but to be invested heavily in them. This is because the Greek Merchant Marine is the largest merchant fleet in the world. Currently, Greece accounts for 18.5% of the fund. [ETFs to Watch in a Recovery.]
Despite being heavily tied to Greece, investor interest is strong, with the fund’s shares trading more than 80,000 per day.
On top of SEA’s heavy ties to Greece, it is important to take note of the Baltic Dry Index, which has “long [been]scrutinized by economists and some investors as a leading indicator of global trade levels,” reports David Cottle of the Source.
In 2008, this index plummeted from a peak of 11,793 points on May 20 to 663 by Dec. 3. Currently, it stands at about 2500 points.
For more information on the shipping industry, visit our shipping category.
Sumin Kim contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.