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Investing in Transportation ETFs

These ETFs will take you places.

By Lou Whiteman – Updated Jun 27, 2022 at 7:08PM

The economy would get nowhere without transportation stocks.

The business of getting people and goods from point A to point B is massive. Companies in the transportation industry run trains, trucks, planes, and ships, operate warehouses, and help manufacturers move goods. Globally, transportation is a $6 trillion industry. There are so many different companies doing so many different things that an investor could fill out an entire portfolio gaining exposure to every corner of the transportation world.

We've seen over the past few years how vital transportation is to the economy. Supply chain issues have been in the news throughout the COVID-19 pandemic, with bottlenecks causing shortages in some key goods and helping to prompt fears of inflation. We've also seen the government and private sector pledge to invest massive sums in new transportation projects to ease the gridlock, creating potential opportunities for investors. 

Given how broad the sector is, transportation is a natural fit for an exchange-traded fund, or ETF. An ETF allows investors to make one purchase and acquire shares in an entire range of companies operating in a single sector. 

Here's are some of the top ETFs for investors looking for exposure to the transportation industry without having to buy a basket of individual companies. 

6 top transportation ETFs

Artist illustration of various means of transportation.
Image source: Getty Images.

iShares US Transportation ETF

The iShares US Transportation ETF (NYSEMKT:IYT) is the largest sector ETF, with $1.23 billion in net assets of of April 14, 2022. It has a broad target, attempting to provide exposure to U.S. airline, railroad, and trucking companies, and also mixing in some technology-infused transportation disruptors.

As of April 14, 2022, the ETF had 52 companies in its portfolio. Its top five holdings included: 

Overall, railroads make up 30.1% of the fund, while air freight and logistics companies comprise 28.7%, trucking has 21%, airlines take up 17%, and marine companies make up 1.6%. The iShares US Transportation ETF has an expense ratio of 0.41%. 

SPDR S&P Transportation ETF

The SPDR S&P Transportation ETF (NYSEMKT:XTN) provides a broad view of the industry, defining transportation as air freight, airlines, airport services, trucks, rail, marine businesses, and port infrastructure. The ETF had $808 million in assets under management as of April 2022 and had 52 companies in its portfolio. The ETF is set up to track the S&P Transportation Select Industry Index.

Its top five holdings as of April were: 

Overall, airlines make up 34.8% of the fund, while trucking comprise 34.5%, air freight has 16.8%, marine makes up 7.8%, and railroads constitute 6.2%. The SPDR S&P Transportation ETF has an expense ratio of 0.35%. 

First Trust Nasdaq Transportation ETF 

The First Trust Nasdaq Transportation ETF (NASDAQ:FTXR) tracks the Nasdaq U.S. Smart Transportation Index, which takes a pretty broad view of transportation. You'll see a lot more emphasis on personal transportation, including autos, in this list. The ETF had $211.7 million in assets as of April 14, 2022.

As of April 14, 2022, the ETF had 30 companies in its portfolio. Its top five holdings included:

As of Dec. 31, 2021, trucking made up 17.5% of the ETF's assets, with rail comprising 17%, automobiles having 15.7%, and airlines making up 13.2%. The First Trust Nasdaq Transportation ETF has an expense ratio of 0.60%.

SPDR S&P Kensho Smart Mobility ETF 

The SPDR S&P Kensho Smart Mobility ETF (NYSEMKT:HAIL) is set up to generally track the Kensho Smart Transportation Index, seeking out companies with products and services that are pushing transportation into the digital age. That includes investments in autonomous vehicles, drones, and next-generation transportation systems.

As of April 14, 2022, the ETF had $105.4 million in assets under management, and its top five holdings were:

Automakers account for 18.5% of the portfolio. Auto parts manufacturers make up 15%, construction machinery comprise 14.1%, semiconductors account for 11.4%, and electronic equipment has 6.6%. Overall, 18 subsectors are represented in the ETF.

The SPDR S&P Kensho Smart Mobility ETF has an expense ratio of 0.45%.

Direxion Daily Transportation Bull 3X Shares

The Direxion Daily Transportation Bull 3X Shares (NYSEMKT:TPOR) ETF uses leverage to try to provide three times the returns of the Dow Jones Transportation Average Index. The strategy has a lot more potential upside than a traditional index-focused ETF but also a lot more risk. Leveraged ETFs tend to be more expensive to own, which is true in this case. The ETF has about $43.25 million in assets. 

As of Dec. 31, 2021, the ETF's top five holdings were:

  • Old Dominion Freight Line (NASDAQ:ODFL): 13.3%
  • Norfolk Southern (NYSE:NSC): 11.1%
  • FedEx (NYSE:FDX): 9.6%
  • Union Pacific: 9.3%
  • United Parcel Service: 7.9%

Overall, 60.1% of the ETF is invested in "road and rail" companies, while 26.5% is in air freight and logistics, 7.8% in airlines, and 5.6% in marine. The Direxion Daily Transportation Bull 3X Shares has an expense ratio of 0.98%.

SmartETFs Smart Transportation and Technology ETF 

The SmartETFs Smart Transportation and Technology ETF (NYSEMKT:MOTO) is designed to invest in the companies that will lead the evolution of transportation, including autonomous vehicles, flying taxis, electric powertrains, and transportation as a service. By its nature, this is a much more tech-centric list of holdings than a traditional transportation ETF. Investors might consider it a good way to invest in industry innovation without tying too much capital to one speculative company. 

The ETF has about $13.7 million in assets. As of April 14, 2022, the ETF's top five holdings were:

The SmartETFs Smart Transportation and Technology ETF has an expense ratio of 0.68%.

Should you add transportation ETFs to your portfolio?

The interesting thing about transports is that while the sector is vital to the economy, a lot of the individual companies have not been long-term winners. Subsectors such as airlines and truckers tend to be cyclical in nature, meaning the stocks tend to ebb and flow along with the economy.

These types of sectors -- where there is strong potential for future growth, but individual companies tend to post choppy performances -- are ripe for ETF investing because it gives an investor exposure to the broader trends without the risks that come with trying to pick individual winners.

The world needs well-functioning transportation systems, and the promise of technology has the potential to reinvent large portions of the transportation economy over time. A transportation ETF gives an investor a chance to go along for the ride while minimizing the risk of buying a lemon.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lou Whiteman has positions in Delta Air Lines and Spirit Airlines. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), FedEx, Nvidia, Old Dominion Freight Line, Qualcomm, and Tesla. The Motley Fool recommends Delta Air Lines, Southwest Airlines, Uber Technologies, and Union Pacific. The Motley Fool has a disclosure policy.

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