With the world's economic situation finally beginning to move in the right direction, freight traffic has been picking up steam. After failing to properly revive following the Great Depression, global trade has rebounded faster than any other economic indicator. Ports are busier, trains are longer and there are more trucks on the roads. According to a report by the Netherlands Bureau for Economic Policy Analysis and Haver Analytics, global trade volumes have rebounded to pre-credit crisis levels and are close to reaching its April 2008 peak. As the world's economic picture continues to become rosier, investors in the space could continue to be rewarded with hefty gains.

TUTORIAL: Stock Basics

Moving More Freight
Since the official end of the recession in June 2009, the iShares Dow Jones Transportation Average (NYSE:IYT) has tacked on more than 55%. Despite the fact that the Dow Jones Transportation Index is trading at an estimated 19 times forward earnings, versus the Dow Industrials' forward P/E of 12.3, the sector is continuing to show growth. Chinese exports surged during 2010 and a weakened dollar has helped the United States export more corn, soy beans, natural gas and oil to emerging economies. Overall, exports in the United States have now returned to pre-crisis levels.

According to industry group Transport Intelligence, airports have reported total global freight traffic growth of 6.8%. Asia Pacific's international freight rose by 9% and domestic by 12% and Europe international increased by 11.4%. Findings are similar in the intermodal freight sector. A 17% surge during the fourth quarter of 2010 helped push overall intermodal volumes up by 14.7% for the year. In addition, U.S. ports handled 1.2 million Twenty-foot Equivalent Units (TEU) in January. That was a 5% increase versus December and a 12% improvement over January 2010. Analyst estimate that import cargo volumes at the nation's major container ports will be up 11% in March over the same month last year.

As the recovery continues to progress forward and global industrial production keeps moving upwards, the transports will continue to benefit. Profits at transport firms have escalated during the recovery as evident by FedEx's (NYSE:FDX) recent robust earnings announcement. Many have handled the increased freight volumes without ramping up costs and many such as Union Pacific (NYSE:UNP), have re-priced legacy contracts to include fuel surcharges.

Betting On the Shippers

With the world's economy finally showing some signs of strength, global trade is rebounding. The transport sector will continue to benefit from the increasing cargo volumes. Investors looking to add the sector do have a variety of choices. Broad-based funds like the SPDR S&P Transportation (NYSE:XTN) can be used to add a wide swath of transports to portfolio. However, there are other choices as well.

While the dry-bulk shippers have run-up immensely over the course of the year, the emerging world's thirst for commodities seems unquenchable. These requirements plus new sources of demand from the liquefied natural gas sector have benefited shippers like Diana Shipping (NYSE:DSX) and Teekay LNG Partners (NYSE:TGP). The Guggenheim Shipping ETF (NYSE:SEA) follows a basket of 30 global shippers across a variety of shipping subsectors.

One of the biggest beneficiaries of increased freight has been the rise of intermodal traffic. Firms like trucker JB Hunt Transport (Nasdaq:JBHT) and rail road CSX (NYSE:CSX) will continue to profit as freight moves effortlessly from port to train to truck.

Finally, both Expeditors International of Washington (Nasdaq:EXPD) and UTI Worldwide (Nasdaq:UTIW) function like travel agents for freight and cargo, providing air and ocean freight forwarding, customs brokerage, distribution and other logistics functions. The key is that these two firms have been making major inroads into emerging markets in Asia, Latin America and Africa.

The Bottom Line
The strengthening global economy is giving the transports a huge boost. Increases in worldwide freight and cargo traffic continue to grow back towards pre-crisis levels and the sector has rallied accordingly. Longer term, many analysts believe that the sector will continue to outperform the broad market for the remainder of the year. Investors with longer timelines may want to consider the sector via funds like the Direxion Airline Shares (Nasdaq:FLYX) or any of the individual stocks listed above. (The railroad industry might seem antiquated, but it remains an important service that reaches all corners of the country. See A Primer On The Railroad Sector.)

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Tickers in this Article: IYT, FDX, UNP, XTN, DSX, TGP, SEA, JBHT, CSX, EXPD, UITW, FLYX

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