As the U.S. economy continues to chug along, air freight and logistics industries could capitalize on the continued expansion. While there are not exchange traded funds that track these specific sub-markets, ETF investors can still target the broader transportation sector.
For instance, the iShares Transportation Average ETF (NYSEArca: IYT) includes a 27.8% tilt toward air freight & logistics and the SPDR S&P Transportation ETF (NYSEArca: XTN) includes 22.4% to the sub-sector.
“S&P Capital IQ maintained its strong buy recommendation last week on FedEx (FDX) and continues to believe that strong U.S. economic indicators bode favorably for the air freight & logistics sub-industry,” writes Todd Rosenbluth, S&P Capital IQ Director of ETF Research, in a research note.
S&P Capital IQ Equity Analyst Jim Corridore argues that demand for international and domestic express and ground shipping remains strong. Looking ahead, strong consumer confidence and retail sales, which were up 0.2% in August, could foreshadow healthy holiday sales, along with general online order fulfillment, Corridore added. Additionally, cheap oil prices will also help diminish costs and augment profitability for air freight & logistics companies.
S&P Capital IQ also recommends looking into United Parcel Services (NYSE: UPS) and Expeditors International (NYSE: EXPD), both of which could benefit from higher shipping demand and transportation demand growth.
Looking at the transportation ETFs, IYT includes a hefty 11.2% tilt toward FDX, 7.7% in UPS and 3.9% EXPD. XTN, which tracks a more equal-weight methodology, includes 2.2% FDX, 2.3% UPS and 2.2% EXPD.
Along with air freight and logistics exposure, IYT and XTN both include exposure to other transportation stocks, such as trucking, railroads and airlines.
Railroads are popular plays among some of the largest investors, including Bill Gates and Warren Buffett. [Sector ETF to Play Warren Buffett, Bill Gates’ Pick]
Additionally, the lower fuel price outlook could also support the airlines as well. While transportation sector ETFs may provide a small exposure to airliners, investors can also take a look at the U.S. Global Jets ETF (NYSEArca: JETS), the only dedicated airline ETF on the market today, to target the global airline industry. [Familiar Catalyst for Airline Stocks, ETF]
For more information on the transportation sector, visit our transportation category.
Max Chen contributed to this article.