The iShares Transportation Average ETF (NYSEArca: IYT) and the SPDR S&P Transportation ETF (NYSEArca: XTN) have traded slightly lower on a year-to-date basis, but both transportation exchange traded funds have recently shown signs of life.
IYT tracks the Dow Jones Transportation Average (DJT). Transportation stocks were expected to benefit from lower oil prices and while that has been the case for airline stocks, other industry groups represented in IYT, including railroads, have lagged broader equity benchmarks. XTN is an equal-weight spin on the transportation sector.
“The charts are bullish on the iShares Transports ETF (ticker IYT),” Ari Wald, head of technical analysis at Oppenheimer, said in an interview with CNBC. “The trend is positive.”
Going forward, the allure of infrastructure investing, which investors can easily engage in via exchange traded funds, could and should rise as governments around the world finally commit the capital necessary to upgraded dated and dangerous bridges, pipelines and roads. In the near-term, however, transportation investments could remain challenged.
Earnings On Tap for Airlines
Airlines are also a significant part of IYT’s lineup. There are encouraging fundamental factors for airlines, including low oil prices. Fuel is the largest input cost for airlines. The improving U.S. economy could encourage more business and leisure travel and airlines are generating impressive amounts of cash.
“Airlines have underperformed the broader market in the past month, as investors worry about rising geopolitical tensions and higher fuel prices. United Continental’s (UAL) earnings report, due out Tuesday, could be an opportunity to move sentiment back into positive territory, but either way airlines look like a buy today, argues Bernstein’s David Vernon,” reports Teresa Rivas for Barron’s.
Related: Transportation ETFs: Ready To Trek Higher?
The U.S. Global Jets ETF (NYSEArca: JETS), the lone ETF dedicated to airline stocks, is lower by about 1% over the past week, but earnings reports from some of the fund’s marquee constituents could send the fund flying higher.
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. JETS is trading at a 10.0 price-to-earnings and a 2.2 price-to-book.
“Gains over the past week have also improved the technical outlook for transports stocks, he said. The IYT has risen by more than 1 percent three times in the past five sessions,” according to CNBC.
For more information on Transportation ETFs, visit our Transportation category.