“Morningstar’s equity analysts give wide moat ratings to all six North American Class I railroads, which include the four Class I carriers held in this ETF. Morningstar’s equity analysts have confidence the rails will continue to increase their profitability, and, as a result, their returns on invested capital. Rail companies (23.5% of IYT’s assets) remain the low-cost option by far, where no waterway links origin and destination, offering quadruple the fuel efficiency of trucking per ton-mile of freight. Even for goods that can be shipped by truck, the railroads charge an estimated 10% to 30% less than trucking containers in the same lane. These cost advantages have been bolstered in recent years by significantly upgraded physical plants and improved on-time performance that has restored shippers’ confidence in carriers’ abilities to deliver freight.,” according to the research firm.
As for airlines, there are catalysts abound with that industry, too. On the recent webcast, Why Airline stocks May Still Have Room to Fly: It’s Not Just About Oil, Helane Becker, managing director for Cowen and Company, pointed out that the U.S. airline industry remains strong and is growing as the economy continues to expand. Specifically, for every 1 point gain in the U.S. gross domestic product, airline traffic growth rises about a 1.5 points. [Exploring ETF Opportunity in the Friendly Skies]
The industry is also enjoying lower costs as oil prices have dropped significantly over the past year. International airliners, though, are not seeing the same level of savings as U.S. airlines, since jet fuel is dollar-denominated.
iShares Transportation Average ETF
