Several ways to invest in a sector with potential.
There has been a lot of focus on transportation investments lately. Federal officials continue to talk about the potential of a big infrastructure spending bill this year. That could add a boost to companies in highway construction, but also railroads and airlines that use transportation infrastructure. The Dow Jones transportation average — a more specialized group of companies than the broader Dow Jones industrial average — has outperformed many other sectors. The transports index is up more than 5 percent since November, while the broader Dow Jones industrial average is up about 1 percent. If you’re looking to invest in this trend, consider these seven infrastructure and transportation ETFs.
iShares Transportation Average ETF (IYT)
This ETF features top airline, railroad and trucking companies. Top holdings right now include shipping giant Fedex Corp. (NYSE: FDX), East Coast railway Norfolk Southern Corp. (NSC) and big rig operator J.B. Hunt Transport Services (JBHT) to name a few. If you’re looking to play the domestic transportation industry, this fund hits all the high notes. However, with just 20 total holdings there isn’t a lot in the way of diversification. FedEx represents almost 15 percent of the entire portfolio. That focus on a small number of companies can be good if a few of these companies break out, but also bad if things go the other way.
SPDR S&P Transportation ETF (XTN)
The XTN fund holds a number of similar companies, but with more than double the number of stocks in its portfolio, it is a much more diversified option. Also, the fund tries to stick to an equal-weight philosophy, meaning that it rebalances regularly to ensure no single stock carries too much importance. The result is that every single company represents 3 percent or less of the portfolio, giving smaller companies like barge operator Kirby Corp. (KEX) the same importance as bigger corporations like J.B. Hunt or FedEx.
Guggenheim Shipping ETF (SEA)
When investors think about America’s transportation network, the first industries that spring to mind are likely trucking and railroad companies. However, with so many goods coming from Europe and Asia, shipping companies are a crucial part of the U.S. economy, too. That’s where the Guggenheim Shipping ETF comes in. Holdings include the owners of shipping giants Cosco Shipping Ports and Maersk, two names you may recognize from the side of shipping containers you see on the highway on flatbeds or clacking by on railroad cars. As the first link in the chain, these shippers are a great way to play an economic recovery where more global goods are in demand.
U.S. Global Jets ETF (JETS)
With just under $100 million in assets, the JETS ETF is one of the smaller transportation funds. However, its focus on the airline industry is an interesting strategy if you’re looking to play a specific part of the U.S. transportation market. As expected, top holdings including giant carriers United Continental Holdings (UAL) and American Airlines Group (AAL). These stocks have done pretty well in recent months as consumer spending has picked up and as ticket prices have moved up across the board. If you expect air travel trends to stay strong, a play on this sector via the JETS fund could be a profitable one.
SPDR S&P Global Infrastructure ETF (GII)
The GII fund allows investors to tap into the global infrastructure that enables companies to function. The list of investments is varied across businesses and geography. About a third of the fund’s assets are in the U.S., with the No. 2 region of Spain commanding just 13 percent, so you can be sure you’re not overly reliant on just one nation’s transportation network. Top holdings include European toll road operator Abertis, North American energy pipeline company Enbridge (ENB) and U.K.-based logistics giant BBA Aviation. An added plus is these businesses include a reliable revenue stream that can fuel nice dividends; the current yield on this ETF is about 3.3 percent.
iShares Emerging Markets Infrastructure ETF (EMIF)
Investing in developed-world transportation infrastructure seems a reliable bet, but there may not be much growth. Emerging market infrastructure has much bigger potential. Unsurprisingly, this iShares fund has China as its top focus with about 35 percent of assets, with another 18 percent in Brazil and about 10 percent in both Mexico and Thailand. Top holdings include a bunch of companies you likely haven’t ever heard of, including a company that manages six of Thailand’s largest airports and a South American highway operator. If you want a more global and growth-oriented flavor to your transportation investments, consider the EMIF fund.
First Trust Nasdaq Global Auto Index Fund ETF (CARZ)
No list of transit investments would be complete without the auto industry. After all, companies like General Motors Co. (GM) and Ford Motor Co. (F) are synonymous with transportation in America. This fund is more than just cars, despite its clever ticker symbol. The F series of trucks is arguably Ford’s biggest moneymaker. Also, firms like Tesla (TSLA) are rapidly developing self-driving technologies and have aims to produce taxi-like vehicles that consumers can rent instead of purchasing a car. Even Toyota Motor Corp. (TM) has big self-driving car designs. Transportation is evolving, and automakers are evolving with it. That may make the CARZ fund worth a look in 2018.
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7 ETFs to Invest in Transit and Infrastructure originally appeared on usnews.com
