Best Transportation ETFs for Q4 2020

Transportation exchange-traded funds (ETFs) give investors exposure to a basket of stocks belonging to a broad range of companies in the transportation sector. The transportation sector is comprised of companies that build transportation infrastructure, manufacture vehicles or other equipment, and provide services. This includes airlines, railroads, trucking, and logistics companies. Some notable companies in this sector include Delta Air Lines Inc. (DAL), CSX Corp. (CSX), and General Motors Co. (GM). Transportation ETFs hold a large number of cyclical stocks because the transport of goods and people fluctuates with the economy, increasing when the economy grows and decreasing when it slows. These funds have underperformed the broader market in the past year. The benchmark S&P 500 Transportation Industry Group Subindex has provided 1-year trailing total returns of 12.3% compared with 18.2% for the S&P 500.

  • The transportation sector underperformed the broader market over the past year.
  • The ETFs with the best 1-year trailing total return are HAIL, IYT, and XTN.
  • The top holdings of these ETFs are NIO Inc., Norfolk Southern Corp., and United Parcel Service Inc., respectively.

The transportation ETF universe is comprised of 5 ETFs, excluding inverse and leveraged funds. The best transportation ETF, based on performance in the past year, is the SPDR S&P Smart Mobility ETF (HAIL). Below, we’ll look at the top three transportation ETFs as measured by 1-year trailing total returns. All numbers in this story are as of August 12, 2020.

ETFs with very low assets under management (AUM), less than $50 million, usually have lower liquidity than larger ETFs. This can result in higher trading costs which can negate some of your investment gains or increase your losses.

  • 1-Year Trailing Total Returns: 42.1%
  • Expense Ratio: 0.45%
  • Annual Dividend Yield: 1.27%
  • 3-Month Average Daily Volume: 9,594
  • Assets Under Management: $12.4 million
  • Inception Date: December 26, 2017
  • Issuing Company: State Street SPDR

HAIL is a multi-cap fund that tracks the S&P Kensho Smart Transportation Index, an index of companies focused on autonomous and electric vehicles, drones, and advanced transportation systems. The ETF targets a blend of growth and value stocks. The ETF’s top holdings include NIO Inc. (NIO), an electric car maker; Plug Power Inc. (PLUG), a fuel cell system manufacturer; and Workhorse Group Inc. (WKHS), a maker of automotive performance monitoring systems.

  • 1-Year Trailing Total Returns: 8.5%
  • Expense Ratio: 0.42%
  • Annual Dividend Yield: 1.37%
  • 3-Month Average Daily Volume: 207,031
  • Assets Under Management: $751.9 million
  • Inception Date: October 10, 2003
  • Issuing Company: iShares

IYT is a multi-cap ETF focused on U.S. transportation equities of varying market caps. The fund tracks the Dow Jones Transportation Average Index and focuses on transport companies directly serving businesses rather than consumers, and exposes investors to multiple tiers of the economy. IYT, which holds growth and value stocks, focuses many of its holdings on the railroad and trucking industries. The ETF’s top three holdings include Norfolk Southern Corp. (NSC), a railroad company; FedEx Corp. (FDX), a delivery and supply chain management company; and Union Pacific Corp. (UNP), a railroad company.

  • 1-Year Trailing Total Returns: 2.3%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 0.98%
  • 3-Month Average Daily Volume: 51,768
  • Assets Under Management: $221.3 million
  • Inception Date: January 26, 2011
  • Issuing Company: State Street SPDR

XTN is a multi-cap ETF that tracks the S&P Transportation Select Industry Index, investing in both growth and value stocks. This ETF has significant small cap exposure, which means it may be more volatile than a typical ETF holding large stocks. The ETF’s top three holdings include United Parcel Service Inc. (UPS), a delivery company; Atlas Air Worldwide Holdings Inc. (AAWW), a holding company providing aircraft, crew, and maintenance to major airlines; and FedEx Corp.