NEW YORK (TheStreet) --Transportation remains an attractive market area as the global economy continues along the road to recovery. However, investors need to be cautious when seeking out a lucrative ways to invest in this industry. An interesting split is surfacing in the sector.
Companies in the rail and trucking industry appear promising while the airline and shipping subsectors appear certain to see some lag in coming weeks and months.
Given this separation, I would advise investors to avoid concentrated plays on specific aspects of transportation industry such as the Guggenheim Airline ETF (FAA) and the Guggenheim Shipping ETF (SEA).
Instead, broad-based products like the iShares Dow Jones Transportation Average Index Fund (IYT) and the Fidelity Select Transportation Fund (FSRX) , which balance transportation's strengths and weaknesses, are more apt for upward action looking towards the future.In recent weeks, it has been hard to ignore the performance of the airline industry. Thanks to strong earnings reports coming from major players including Delta (DAL) , Southwest (LUV) and the newly merged United Continental (UAL), FAA has managed to power skyward locking in all-time highs. Although this performance has been notable, based on the outlooks from industry representatives, the curtain may be closing on this rally. This week, the head of the International Air Transport Association offered a less than optimistic prediction for the airline industry. Setting his sight towards the near future, the representative reported that the peak is likely over for the airlines and expects the industry's profits will swing significantly lower in 2011. Meanwhile, oversupply issues threaten to strangle the upside potential for the shipping industry. In a report this week from Bloomberg, analysts noted that shipping rates for supertankers have faced a dramatic downturn as fleets expand faster than demand for oil. The drag is not expected to disappear any time soon. Rather, the majority of analysts from the industry foresee supertankers being unprofitable for at least two years. While the near term prospects for the shipping and airline industry look poor, land-based transportation sectors appear to be showing some promising signs. Railroad companies such as Kansas City Southern (KSU) and Union Pacific (UNP) have released optimistic earnings numbers. Elsewhere, in the trucking industry, the American Trucking Association recently reported an increase in truck tonnage in September. Following this report, C.H. Robinson Worldwide (CHRW) released an analyst beating earnings report. Because they are designed to track all aspects of the transportation industry, funds such as IYT and FSRFX are not immune to the weaknesses in airlines and shipping. They are, however, able to offset these weak points thanks to their heavier dedication to the promising aspects of the transportation industry.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV