As evidence of increased commercial interest and product development for a variety of global transport ETFs, the following ideas have been either launched or filed: Claymore/Delta Global Shipping (SEA) (Aug. launch), PowerShares Global Progressive Transportation (PTRP) (Sep. launch), and SPDR Transportation (filed with SEC). The iShares Dow Transports (IYT) is easily the most popular transport ETF with investors, with $689M in net assets as of the market close yesterday as compared to $1.8M for PTRP and $4.7M for SEA. Despite the wide recognition and popularity of the underlying Dow Transports index, IYT has several limitations such as a lack of ex-U.S. companies, the inclusion of four airlines, a limited basket of 20 stocks, and a concentration in the top five weighted stocks of over 43%.
The accompanying table presents the ETFI Global Railroad Index, which is a market cap-weighted index of 42 companies with a total return over the past year of -14.8%, outpacing IYT at -21.6% and the S&P 500 ETF (SPY) at -40%. While five of the top seven companies are based in North America and listed for trading on the NYSE, 26 of the 42 companies are not listed for trading in the U.S. The outlook for rail transport is bullish as the industry has pricing power because there is limited ability to increase capacity in terms of new tracks. Warren Buffett holds a large stake in Burlington Northern (BNI) and is a long-term bull on the industry, and a railroad ETF would give investors a globally diversified investment option beyond just rail transport companies, including railcar makers and rail infrastructure suppliers.
The accompanying table presents the ETFI Global Railroad Index, which is a market cap-weighted index of 42 companies with a total return over the past year of -14.8%, outpacing IYT at -21.6% and the S&P 500 ETF (SPY) at -40%. While five of the top seven companies are based in North America and listed for trading on the NYSE, 26 of the 42 companies are not listed for trading in the U.S. The outlook for rail transport is bullish as the industry has pricing power because there is limited ability to increase capacity in terms of new tracks. Warren Buffett holds a large stake in Burlington Northern (BNI) and is a long-term bull on the industry, and a railroad ETF would give investors a globally diversified investment option beyond just rail transport companies, including railcar makers and rail infrastructure suppliers.
$67.6 (10/17/08)
