With yesterday’s elevated tensions regarding potential terror plots involving the subway transit systems of both NYC and Paris that filtered into the daily headlines, it brings us to a quick examination of the Transportation Equity sector in the ETF landscape.
In fact, the trading yesterday in tandem with these headlines had us recall the time period of the mid 2000’s when “terror threat” headlines would regularly filter through the daily newswires, with more hoaxes and diffused plots than actual terror attacks, but it tends to be a nervous atmosphere foremost everyone nonetheless.
Also as painful it is to recall, there was elevated volume and short activity in such things as Airlines stocks shortly before the 9/11 terror attack, and although we believe that markets are more efficient today in terms of rooting out sinister trading that attempts to profit at the expense of terror and destruction, it still makes sense to examine funds that have exposure to what some might consider vulnerable, or “at risk” segments of the economy should some plot be acted upon somewhere, successfully that affects transportation systems either domestically or overseas.
The largest fund here is the rather well-known IYT (iShares Transportation Average, Expense Ratio 0.44%) which has its highest level of exposure to the Railroads (>25%), followed by Delivery Services (>21%), Trucking
(>19%), and Airlines (>14%). Top holdings in IYT are FDX, KSU, KEX, UPS, and NSC. XTN (SPDR S&P Transportation ETF, Expense Ratio 0.35%) is notably smaller than IYT in terms of asset size, with about $277 million in AUM currently.
Top holdings in XTN are LUV (2.91%), JBLU (2.86%), CAR (2.84%), SAVE (2.74%), and XPO (2.70%). It should be noted however that XTN is not market cap weighted like IYT, but instead a modified equal-weighted methodology is employed, so there are different levels of exposure to the various sub-industries within the greater Transportation segment, some of which were mentioned above in the context of IYT.
SEA (Guggenheim Shipping Index ETF, Expense Ratio 0.65%) is a bit different as its name suggests, as it tracks the Dow Jones Global Shipping Index and the holdings are solely overseas shipping companies and not Airlines for instance.