Airline stocks have been stellar performers this year. Delta Airlines (NYSE: DAL) has surged 35.6%. United Continental (NYSE: UAL) is up 23.3%.
Southwest Airlines (NYSE: LUV) is up a jaw-dropping 51% while the new American Airlines (NasdaqGS: AAL), the combination of US Airways and the not-far-removed from bankruptcy American, is up 52%.
Those returns have been pivotal in lifting the iShares Transportation Average ETF (NYSEArca: IYT) and the SPDR S&P Transportation ETF (NYSEArca: XTN). The performance of airline stocks this year has also made ETF investors long for the days when airline ETFs were available.
“The Guggenheim ETF, which had FAA as its ticker — think Federal Aviation Administration — closed right in the middle of a 151 percent tear in airline stocks over two and half years. Such a rally inevitably got more investors interested in the notoriously cyclical industry,” writes Eric Balchunas for Bloomberg.
Investors craving airline exposure via ETFs have been forced to turn to IYT and XTN, which feature airline weights of 14% and 24.3%, respectively. There is another option that also investors leverage to a potential rebound in the moribund consumer discretionary sector: The PowerShares DWA Consumer Cyclicals Momentum Portfolio (NYSEArca: PEZ).
PEZ differs from standard discretionary ETFs in that it is not home to some of the sector’s most familiar names such as Home Depot, Walt Disney (NYSE: DIS), Ford (NYSE: F) McDonald’s (NYSE: MCD) or cable providers. [Momentum Bounce for a Discretionary ETF]
Rather, PEZ is true to its momentum roots as it features Netflix (NasdaqGS: NFLX) and Tesla (NasdaqGS: TSLA) among its top-10 holdings. PEZ is one of just 11 ETFs that features Tesla among its top-10 holdings and one of just eight that extend the same courtesy to Netflix, according to S&P Capital IQ data.
American Airlines is the ETF’s ninth-largest holding at 3.4%. Overall, devotes 12.1% of its weight to airlines, making the group the ETF’s second-largest industry exposure behind specialty retail. PEZ is also one of just 11 ETFs that show American Airlines as a top-10 holding.
American as a top-10 holding is good news for PEZ as the company just announced a $1 billion buyback and its first dividend in over three decades, according to Bloomberg. In addition to American, PEZ holds four other airline stocks, including a 1.3% weight to Hawaiian Holdings (NasdaqGS: HA), a stock that is up 46.4% this year.
PowerShares DWA Consumer Cyclicals Momentum Portfolio
ETF Trends editorial team contributed to this post.
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.