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A Key Analysis of 2Q15 Institutional Investor Activity in the Transportation Sector

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A Key Analysis of 2Q15 Institutional Investor Activity in the Transportation Sector PART 1 OF 4

Truckers and Dry Bulkers Trail behind Transportation Counterparts

Performance of subindustries versus benchmarks

Thus far in 2015, no particular transportation subindustry has been able to post gains. As illustrated in the table below, shipping stocks have trailed those of peers, falling 11.35% in the last month, and were followed by trucking companies, which on average fell 8.45% during the same period.

Truckers and Dry Bulkers Trail behind Transportation Counterparts

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Shipping companies in aggregate have lost 20.83% this year due to a sharp decrease in demand from Asia. Dry bulkers such as FreeSeas (FREE), Paragon Shipping (PRGN), DryShips (DRYS), and Star Bulk Carriers Corp (SBLK) are among maritime stocks that have fallen more than 50% to date. On the contrary, oil tanker companies have yielded on average more than 20% to shareholders, with Nordic American Tankers (NAT) occupying the top slot, having returned 40.12% YTD.

Trucking and railroad performance

Trucking companies have had an appalling year, and this trend continued in last month. Over the last 30 days, major players such as J.B. Hunt Transport (JBHT), Old Dominion Freight Line (ODFL), and Landstar System (LSTR) fell 12.95%, 7.36%, and 9.37%, respectively. Railroads have also fallen considerably in 2015 due to continued weakness in coal demand. As a result, Class I railroad operators such as Union Pacific Corp (UNP), Norfolk Southern Corp (NSC), Kansas City Southern (KSU), and Canadian Pacific Railway (CNP) have all seen their shares fall by more than 20% this year. Meanwhile the S&P 500 SPDR ETF (SPY) has fallen by 6% over the last 30 days.

The transportation sector is considered a leading economic indicator, and roughly 65% of freight movement takes place through trucking firms. In all likelihood, the slump in trucking implies a sign of tougher times ahead for the economy.

IYT composition

The iShares Transportation ETF (IYT) is a proxy of the Dow Jones Transportation Average index, which is a composition of 20 of the most actively traded companies from the transportation sector. IYT includes four air freight and logistics providers, five passenger airline operators, four companies from the railroad industry, two companies from the marine shipping sector, four trucking operators, and one car rental company.

These stocks are price-weighted in the ETF. Therefore, stocks that have relatively higher share prices tend to have a greater weight. In other words, stocks with a higher share price have a greater influence on the ETF’s performance. In comparison, the SPDR Transportation ETF (XTN) comprises 48 stocks from the transportation sector and seeks to replicate the performance of the S&P Transportation Select Industry Index, which is a modified equal-weighted index.

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