Best Transportation ETFs for Q4 2022

IYT, FTXR, and XTN are the best transportation ETFs for Q4 2022

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 sector is composed of companies that build infrastructure, manufacture vehicles or other equipment, and provide services for the industry. 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).

Key Takeaways

  • The transportation sector has underperformed the broader market over the past year.
  • The transportation exchange-traded funds (ETFs) with the best one-year trailing total returns are IYT, FTXR, and XTN.
  • The top holdings of these ETFs are United Parcel Service Inc., C.H. Robinson Worldwide Inc., and Atlas Air Worldwide Holdings Inc., respectively.

Transportation ETFs hold a large number of cyclical stocks because the transport volume of goods and people fluctuates with the economy, increasing when the economy grows and decreasing when it slows. These stocks have underperformed the broader market, with the benchmark S&P 500 Transportation (Industry Group) Index delivering a one-year trailing total return of -4.2% compared to -11.0% for the S&P 500, as of Sept. 1, 2022.

Over the past year, the transportation sector has benefited from the reopening of the economy, the passage of the infrastructure bill by the U.S. Congress, and rising use of electric vehicles.

There are five transportation ETFs that trade in the U.S., excluding inverse and leveraged funds and with less than $50 million in assets under management (AUM). The best transportation ETF, based on performance over the past year, is the iShares U.S. Transportation ETF (IYT) Below, we’ll look at the top three transportation ETFs as measured by one-year trailing total returns. All figures below are as of Sept. 2, 2022. In order to focus on the fund's investment strategy, the top holdings listed for ETFs exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large.

iShares U.S. Transportation ETF (IYT)

  • One-Year Trailing Total Returns: -10.4%
  • Expense Ratio: 0.41%
  • Annual Dividend Yield: 0.73%
  • Three-Month Average Daily Volume: 182,817
  • Assets Under Management: $826.5 million
  • Inception Date: Oct. 06, 2003
  • Issuer: BlackRock Financial Management

IYT seeks to track the S&P Transportation Select Industry FMC Capped Index (USD), which is comprised of a group of U.S. equities within the transportation sector. The ETF provides exposure to airline, railroad, and trucking companies within the U.S. Air freight companies receive the largest allocation within the fund, followed by railroad companies and logistics companies, and trucking companies. The fund follows a blended strategy of investing in a mix of growth and value stocks of companies with a range of market capitalizations.

The top three holdings of IYT include class B shares of United Parcel Service Inc. (UPS), an international package delivery company; and Union Pacific Corp. (UNP) and CSX, which are major U.S. railroad and intermodal transportation companies.

First Trust Nasdaq Transportation ETF (FTXR)

  • One-Year Trailing Total Returns: -13.5%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: 0.57%
  • Three-Month Average Daily Volume: 46,558
  • Assets Under Management: $81.9 million
  • Inception Date: Sept. 20, 2016
  • Issuer: First Trust

FTXR tracks the Nasdaq U.S. Smart Transportation Index, an index composed of securities of companies within the U.S. transportation industry. The securities within the index are weighted based on the following three factors: volatility, value, and growth. The ETF provides exposure to a range of transportation companies, with trucking companies receiving the largest allocation, followed by railroads, auto parts makers, and airlines. The multi-factor-weighted fund follows a blended strategy, investing in a mix of growth and value stocks of various market caps.

The top three holdings of FTXR include C.H. Robinson Worldwide Inc. (CHRW), a freight transportation and services company. PACCAR Inc; (PCAR), a manufacturer and distributor of commercial trucks and other vehicles; and Union Pacific.

SPDR S&P 500 Transportation ETF (XTN)

  • One-Year Trailing Total Returns: -17.1%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 1.08%
  • Three-Month Average Daily Volume: 50,831
  • Assets Under Management: $462.5 million
  • Inception Date: Jan. 26, 2011
  • Issuer: State Street

XTN aims to track the S&P Transportation Select Industry Index, which is designed to gauge the performance of the transportation segment of the broad U.S. equity market. The ETF provides exposure to air freight and logistics, airline, airport services, highway and rail track, marine, marine ports and services, railroad, and trucking companies. Nearly two thirds of the fund is composed of trucking companies and airlines. It follows a blended strategy, investing in a mix of value and growth stocks across the market-cap spectrum.

The top three holdings of XTN include Atlas Air Worldwide Holdings Inc. (AAWW), an aviation services company that provides outsourced operating solutions; Frontier Group Holdings Inc. (ULCC), a low-cost airline transport company; Uber Technologies Inc. (UBER), is a global ride-share, food delivery, and freight transport company.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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