What Is the Transportation Sector?
Let me explain the transportation sector to you directly: it's a group of companies that handle moving people or goods, along with the infrastructure that supports it. Technically, it's a subgroup of the industrials sector under the Global Industry Classification Standard (GICS). This sector breaks down into industries like air freight and logistics, airlines, marine, road and rail, and transportation infrastructure. These then split further into sub-industries such as air freight and logistics, airlines, marine, railroads, trucking, airport services, highways and rail tracks, and marine ports and services.
Key Takeaways
You should know that the transportation sector is a vital part of the economy, dealing with the movement of people and products. It includes companies like airlines, trucking firms, railroads, shipping operations, and logistics providers, plus those that build and maintain transportation infrastructure. Remember, the Dow Jones Transportation Index (DJTA) was the first U.S. stock market index and still follows 20 of the sector's most significant companies.
Understanding the Transportation Sector
I want you to understand that companies in the transportation industry are very sensitive to changes in their earnings and the prices of their services. The main factors impacting earnings include fuel costs, labor costs, demand for services, geopolitical events, and government regulations. Many of these factors connect with each other—for instance, if the U.S. government introduces rules that make it harder to get a commercial driver's license, it reduces the number of available drivers, which drives up hiring costs.
Oil prices play a crucial role in transportation, as they directly affect expenses. When gas and fuel prices go up, it increases costs for a trucking company, cutting into profits and possibly lowering their stock price.
Energy costs and transportation stock values are closely linked. Low energy costs can help boost share prices for transportation companies, but the effect can go the other way too. High demand for transportation services shows up in quarterly reports, which might encourage energy traders to push up oil prices. On the flip side, if demand for commercial transportation drops, it could lead to falling oil prices.
Investing in the Transportation Sector
If you're looking to invest in companies that move people and products, you can buy shares in individual transportation firms, or go for sector-specific mutual funds or exchange-traded funds (ETFs) focused on transportation. This sector is one of the most diverse, covering industrial companies in airlines, railroads, trucking, equipment and leasing, and logistics. Funds tracking this sector will follow a benchmark index like the DJTA.
The Dow Jones Transportation Index
The Dow Jones Transportation Average (DJTA) is a price-weighted average of 20 transportation stocks traded in the U.S. It's actually the oldest U.S. stock index, put together in 1884 by Charles Dow, co-founder of Dow Jones & Company. It started with nine railroad companies—showing their dominance in transportation back then—and two non-railroad firms. Today, it covers railroads, airlines, trucking, marine transportation, delivery services, and logistics companies.
Dow Jones Transportation Index Companies
- NYSE: ALK - Alaska Air Group
- Nasdaq: CHRW - C.H. Robinson Worldwide
- NYSE: CSX - CSX Corp.
- NYSE: CNW - Con-way
- NYSE: DAL - Delta Air Lines
- Nasdaq: EXPD - Expeditors International of Washington
- NYSE: FDX - FedEx
- NYSE: GMT - GATX
- Nasdaq: JBHT - J.B. Hunt Transport Services
- Nasdaq: JBLU - JetBlue Airways
- NYSE: KSU - Kansas City Southern
- NYSE: KEX - Kirby
- Nasdaq: LSTR - Landstar System
- NYSE: MATX - Matson
- NYSE: NSC - Norfolk Southern
- NYSE: R - Ryder System
- NYSE: LUV - Southwest Airlines
- NYSE: UNP - Union Pacific
- NYSE: UAL - United Continental Holdings
- NYSE: UPS - United Parcel Service
S&P Transportation Select Index
There's also the S&P Transportation Select Industry index, which serves as another benchmark for the sector. It has 42 constituents and was incepted on June 18, 2006. The maximum market cap is 81,926.05, minimum is 423.22, mean is 8,861.79, and median is 2,543.45.
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