5 ETF Gateways for Record Memorial Day Travel

A higher number of Americans are gearing up for a busy summer travel season by road or air this time encouraged by a booming economy and growing consumer confidence. This is especially true as the frenzy for trips during the Memorial Day Weekend is far more than the past decade despite the highest gasoline prices in four years. Top destinations include cruises to Alaska from Seattle and warm-weather spots like Orlando, Florida, Honolulu and Las Vegas.

According to travel service provider American Automobile Association (AAA), Memorial Day weekend travel is expected to rise for the fourth straight year. More than 41.5 million Americans will travel 50 miles (80 km) over the Memorial Day weekend (May 24-28), up nearly 5% from the last year and the most in more than a dozen years. Of them, 36.6 million will go on a road trip, 3.1 million will fly, and 1.8 million will travel by train and other modes (including buses and cruises).

Though road trip is expected to rise 4.7% over last year, motorists are expected to pay the highest gas price since 2014. Gas price currently averaged $2.95 per gallon, up 59 cents from last year. It is expected to climb higher and hit $3 nationwide during the Memorial Day weekend. However, travelers’ wallets will find some relief when paying for airfare, car rentals, and most mid-range hotels (read: Pump Up Gains With This Gasoline ETF).

This is because airfares are 7% lower than the last Memorial Day for an average $168 round-trip on the top 40 domestic routes while the average daily cost of a car rental is 11% cheaper and the lowest in the past four years, per AAA’s Leisure Travel Index. Meanwhile, AAA Three Diamond hotels are 14% cheaper than last year at an average rate of $186 per night.

Huge travel demand should boost revenues and profitability for transporters, including airlines and railroads, thereby leading to higher share prices. Investors shouldn’t miss this opportunity and could tap this trend through any of the ETFs that stand to profit big time from the upbeat Memorial Day weekend travel trend.

iShares Transportation Average ETF IYT

The fund tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 20 securities. It is heavily concentrated on the top firm FedEx FDX at 14.7%, while other firms account for less than 9% share. From a sector perspective, air freight & logistics takes the top spot with 30.2% of the portfolio while railroads, trucking and airlines round off to the next three spots with double-digit exposure each. The fund has accumulated nearly $831.9 million in AUM while sees solid trading volume of around 246,000 shares a day. It charges 44 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Slew of Earnings Beat Fails to Lift Transport ETFs).

SPDR S&P Transportation ETF XTN

This fund tracks the S&P Transportation Select Industry Index, holding 42 stocks in its basket with none holding more than 3% of assets. About 32.1% of the portfolio is dominated by trucking, while airfreight & logistics and airlines round off the next spots with 25% and 22.7%, respectively. With AUM of $228.4 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 34,000 shares a day. XTN has a Zacks ETF Rank #3 with a High risk outlook (read: Solid Small-Cap Earnings Put Spotlight on These Sector ETFs).

First Trust Nasdaq Transportation ETF FTXR

This fund offers exposure to the 30 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. Each firm hold less than 8.8% share in the basket. From an industrial look, auto parts takes the largest share at 25.3% while trucking, delivery services, automobiles and railroads round off the next spots with double-digit exposure each. FTXR has accumulated $3.8 million in its asset base and charges 60 bps in annual fees. Average trading volume is meager at 1,000 shares. The ETF has a Zacks ETF Rank #3.

U.S. Global Jets ETF JETS

This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 34 securities that are heavily concentrated on the top four firms with double-digit allocation each. Other firms hold no more than 4.25% share. The fund has gathered $98.1 million in its asset base while sees lower trading volume of nearly 39,000 shares a day. It charges investors 60 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Sector ETFs to Top & Flop on Higher Oil Prices).

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ISHARS-TRAN AVG (IYT): ETF Research Reports
 
SPDR-SP TRANSPT (XTN): ETF Research Reports
 
US GLOBAL JETS (JETS): ETF Research Reports
 
FedEx Corporation (FDX) : Free Stock Analysis Report
 
FT-NDQ TRANSPRT (FTXR): ETF Research Reports
 
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