Should You Invest in the iShares U.S. Transportation ETF (IYT)?

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Looking for broad exposure to the Industrials – Transportation/Shipping segment of the equity market? You should consider the iShares U.S. Transportation ETF (IYT), a passively managed exchange traded fund launched on 10/06/2003.

– Zacks

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials – Transportation/Shipping is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $1.88 billion, making it one of the larger ETFs attempting to match the performance of the Industrials – Transportation/Shipping segment of the equity market. IYT seeks to match the performance of the Dow Jones Transportation Average Index before fees and expenses.

The Dow Jones Transportation Average Index measures the performance of companies from the Industrial Transportation, Airline and General Industrial Services industries of the U.S. equity market.

Costs

Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.41%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.72%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector–about 100% of the portfolio.

Looking at individual holdings, Fedex Corp (FDX) accounts for about 12.47% of total assets, followed by Kansas City Southern (KSU) and Norfolk Southern Corp (NSC).

The top 10 holdings account for about 79.80% of total assets under management.

Performance and Risk

So far this year, IYT has added about 29.84%, and is up about 33.94% in the last one year (as of 11/10/2021). During this past 52-week period, the fund has traded between $208.84 and $279.33.

The ETF has a beta of 1.22 and standard deviation of 27.89% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Transportation ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IYT is a great option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

First Trust NASDAQ Transportation ETF (FTXR) tracks Nasdaq US Smart Transportation Index and the U.S. Global Jets ETF (JETS) tracks U.S. Global Jets Index. First Trust NASDAQ Transportation ETF has $1.22 billion in assets, U.S. Global Jets ETF has $3.77 billion. FTXR has an expense ratio of 0.60% and JETS charges 0.60%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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iShares U.S. Transportation ETF (IYT): ETF Research Reports

Norfolk Southern Corporation (NSC): Free Stock Analysis Report

Kansas City Southern (KSU): Free Stock Analysis Report

FedEx Corporation (FDX): Free Stock Analysis Report

U.S. Global Jets ETF (JETS): ETF Research Reports

First Trust NASDAQ Transportation ETF (FTXR): ETF Research Reports

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