Transports have provided a safe haven for investors with the
iShares Dow Transports (IYT) registering a small gain over the past year in spite of a meltdown in financials and sharp losses in the overall market averages. The gains in the Dow Transport ETF were largely the result of strong performance by the top four U.S.-based railroads by market cap which I
wrote about yesterday as a bullish trade, accounting for over 30% of the stock holdings for IYT.
As evidence of increased commercial interest and product development of globally-focused transport ETFs among major providers, the following ideas have recently been either launched or filed: Claymore/Delta Global Shipping (*launched 8/25/08) (SEA),
PowerShares Global Transportation (filed with SEC), and
SPDR Transportation (filed with SEC). I think the increased interest by investors in transports warrants commercial development of focused ETFs in the following segments on a global basis:
1.)
Railroad: A bullish segment due to pricing power as a result of limited ability to add capacity and increased demand for fuel efficient transport of energy and agricultural commodities. In addition to the four top U.S. railroads
I outlined yesterday, investors should also consider Canadian National Railway (CNI), which is actually down nearly 6% over the past year compared to gains for its major competitors here in the states.
2.)
Maritime: There is now an ETF for investors and traders as of the 8/25/08 launch of Claymore/Delta Global Shipping (SEA) with the
Baltic Dry Index down 42.8% over the past year on concerns of a global slowdown and previous run-up which proved to be unsustainable.
3.)
Short Airline: Although the industry is getting a lift from falling oil prices and presents an excellent trading vehicle due to high volatility, Southwest Airlines (LUV) is the leading company and only long-term investment vehicle I would consider as a hedge to an overall short position.
4.) Short Trucking: The top five companies by market cap in the trucking, air freight, and ground delivery segment account for over 50% of the entire global index of 49 companies with market caps over $250M US Dollars which have posted a loss over 20% in the past year on a market cap-weighted basis. As a long position and hedge to a short on the overall segment, I would consider Ryder System (R) as a long-term investment in this group based on its truck rental/leasing and supply chain management business model.
