Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some transportation stocks to your portfolio but don't have the time or expertise to hand-pick a few, the SPDR S&P Transportation ETF (XTN -0.81%) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
The basics
ETFs often sport lower expense ratios than their mutual-fund cousins. This ETF focused on transportation stocks sports a rather low expense ratio -- an annual fee -- of 0.35%. The ETF is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This transportation stocks ETF is too young to have much of a track record, but it has trounced the world market over the past year. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why transportation stocks?
Transportation is something of a staple, as we'll always need to move ourselves and other things here and there. Better still, as our global economies pick up, companies will be shipping more products. Thus, the future for transportation stocks is promising.
More than a handful of transportation stocks saw strong performances over the past year. Hertz Global Holdings (HTZG.Q) surged 78%, for example. It rents both cars and equipment, and its brands include not only Hertz, but also Dollar, Thrifty, and Firefly. It recently lowered its near-term projections, seeing weak rental demand, and its stock took a hit. Still, consolidation in car rentals bodes well for Hertz. The company recently scored a prestige and marketing win by announcing plans to offer Tesla cars in its lineup.
United Parcel Service (UPS -0.28%) jumped 38%, is near a 52-week high, and offers a tasty 2.6% dividend yield, too. UPS is poised to prosper as e-commerce grows, and it's chasing new revenue sources such as 3-D printing, which it will offer in its stores. Its recently reported third quarter featured revenue up 3.4% and profit up 9.4%. It has been aggressively buying back stock, spending nearly $3 billion. Bulls are looking forward to the holiday season, while bears worry about union contract negotiations.
CSX (CSX -1.21%) gained 33% and yields 2.3%. The railroad company has been hurt by weakness in coal, but has been diversifying its revenue streams effectively, ferrying more merchandise and intermodal cargo. Transporting petroleum and other energy products is another revenue booster. CSX has lower profit margins than its peers, but it has been boosting its efficiency. It topped expectations in its last quarter.
Expeditors International (EXPD 0.22%), which serves transportation companies with its logistics services, advanced 30% and is near a 52-week high. There's a bit of uncertainty surrounding the company, as its CEO is retiring, but Expeditors has been growing its market share and improving its business. Perhaps taking a cue from The Motley Fool, the company recently issued an SEC document that was intentionally amusing. The stock yields 1.3%.
It won't always be this way, but it's actually hard to find a transportation stock in this ETF that hasn't had a good year.
The big picture
Consider adding transportation stocks to your portfolio. A well-chosen ETF can grant you instant diversification across any industry or group of companies and make investing in it -- and profiting from it -- that much easier.
