Airline ETF Could be Ready to Takeoff

The U.S. Global Jets ETF (NYSEArca: JETS), the only dedicated airline industry-related ETF on the market, is off more than 4% year-to-date, but the airline ETF has also gained more than 4% over the past month, indicating it could be poised to rally into the end of the year.

JETS follows the U.S. Global Jets Index, which uses fundamental screens to select airline companies, with an emphasis on domestic carriers, along with global aircraft manufacturers and airport companies.

Along with lower oil prices, airline stocks look attractive in their own right. For instance, income-oriented investors may notice that airline stocks have seen improved dividend-yield growth.

Additionally, the sector shows relatively cheap valuations. Airline stocks have a 7 times price-to-earnings ratio, whereas the broader transportation stocks have a 15 times ratio and the S&P 500 index shows 17 times P/E.

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Some analysts are increasingly bullish on the prospects for airline stocks, including some of the biggest holdings in JETS.

“After suggesting last summer that investors enjoy a break until the turn in RASM became more apparent, we believe said turning point is upon us. Capacity trends continue to tighten, close-in yield progress is apparent, and positive RASM in 2H17 may help unlock stubborn multiples,” according to a JPMorgan note posted by Ben Levisohn of Barron’s.