Make Money in Transportation Stocks -- the Easy Way
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the transportation industry to prosper a s our global economy finally recovers, the iShares Dow Jones Transportation Average ETF (NYS: IYT) 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.
ETFs often sport lower expense ratios than their mutual fund cousins. The transportation ETF's expense ratio -- its annual fee -- is a relatively low 0.47%.
This ETF has performed adequately in recent years, modestly beating the S&P 500, on average, over the past three and five years. 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.
With a very low turnover rate of 8%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several transportation companies had strong performances over the past year. Union Pacific (NYS: UNP) railroad, for example, rose 22%, and its future looks rosy, too, as some manufacturing shifts from China to North America due to rising wages in Asia. It posted record profits recently, and has been buying back gobs of stock. Fellow railroad concern CSX (NYS: CSX) didn't fare as well last year, falling 10%, but it's also poised to perform well in coming years. Both companies hiked their dividends significantly over the past year.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Trucking company C. H. Robinson Worldwide (NAS: CHRW) shed 6%, partly on worries over high fuel costs and shrinking profit margins, but its revenue is growing briskly. It recently sported a 2% dividend yield, and it has been raising that payout by an average of 20% annually over the past five years.
The big picture
Demand for transportation isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
At the time this article was published Longtime Fool contributorSelena Maranjian, whom you can follow on Twitter@SelenaMaranjian, holds no position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of United Parcel Service. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.