3 Transportation ETFs Picking Up Steam

June 12, 2014

A pickup in the economy is translating into double-digit returns for transportation ETFs.

Markets are reaching new highs after a rough first quarter dampened by severe winter weather, and some of that upside action includes double-digit gains in the transportation stocks—a sector considered a good way to gauge the overall health of the economy.

Year-to-date, the Dow Jones Global Shipping Index and the Dow Jones Transportation Average Index are up 6.4 percent and 10.1 percent, respectively, while the S&P 500 Index is up 5.5 percent. Union Pacific Corp., the railroad, has gained upward of 21 percent this year thanks to a pickup in demand for coal and natural gas.

“The first quarter was very difficult for most of the transportation stocks because of the severe weather that we had throughout the U.S. that impacted revenues and earnings of different transportation sectors, including trucking, railroads, logistics,” said Jim Corridore, senior associate director, equity research at S&P Capital IQ.

“But stocks and ETFs that hold these stocks are starting to move up based on optimism about overall demand strength, improving U.S. and global economies,” he added.

The following three related ETFs are currently riding market highs, with more room to run.

3. Guggenheim Shipping ETF (SEA | C-38)

SEA tracks an index of global maritime shipping companies selected by dividend yield and weighted by market cap. The fund is a hybrid: part industry-niche fund and part dividend fund, and its top names are often seen on the sides of huge container vessels, including Maersk and Cosco.

The fund, which tracks the Dow Jones Global Shipping Index, is up almost 7 percent this year, but can potentially make double digits if commodity demand from China picks up, according to Sumit Roy, managing editor of Hard Asset Investor.

“China has been slowing and it’s not providing the demand support for commodities like it once did,” said Roy. “That’s a major reason commodity prices [and SEA] aren’t up more.”



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