1. SPDR S&P Transportation ETF (XTN | A-59)
XTN tracks the broad-based, equal-weighted S&P Transportation Select Industry Index of U.S. stocks in the transportation industry, giving it more exposure to smaller-cap names within the industry that tend to pop more than their larger-cap counterparts in a rising market.
In addition, airline names such as Delta Air Lines, American Airlines and JetBlue Airways play a more prominent role in XTN’s portfolio than its competitor IYT. Delta has surged more than 48 percent this year and JetBlue is up 22.5 percent. American Airlines is up almost 69 percent year-to-date, resulting in a gain of more than 15 percent for XTN.
Corridore says his firm is very positive on the airlines space because through mergers and bankruptcies, these companies have reduced competition, improved their balance sheet health and their ability to respond to shifts in demand.
“They have changed their behavior patterns in terms of how they compete, so instead of competing for market share gains and future profitability, they’re competing for sustained profitability now,” he said. “If there is a demand downturn, I think they will cut capacity rather than fares.”
Corridore adds that the first quarter is traditionally the weakest quarter for airlines, whereas Q2 and Q3 are their two strongest, because of summer and holiday travel.
Charts courtesy of StockCharts.com