Ride Transportation Sector Growth With This ETF [SPDR Series Trust]

investAfter a weak start to the year, the transportation sector has been performing quite well thanks to an improved economic picture. Harsh weather conditions during the first quarter took a toll on most freight companies leading to reduced operational efficiencies and shooting costs, but that appears to be behind the space now.

However, a pick up in economic and manufacturing activity has led transportation companies to register a good rebound. The sector is one of the leading indicators of a recovering economy, which necessarily reinvigorates demand for movement of goods across many sectors. This was especially true for Q2 with the U.S. economy expanding by a solid 4.2% after contracting by 2.9% during the first quarter of this year.

In fact, the transportation sector was one of the strong performers during the Q2 earnings season with the companies in the space handily beating their earnings estimates. The sector recorded an 11.5% year-over-year earnings growth and 81% of the 11 companies that comprise the Zacks Transportation Sector posted positive earnings and revenue beats (read: Where Will Transportation ETFs Go From Here?).

Moreover, with expectations of improved U.S. economic growth in the upcoming quarters and beyond, the transportation sector is primed to reap the benefits. Further the sector is expected to show 8.57% growth in total earnings during the second half of the year and a massive 25.7% growth in total earnings in Q1 2015.

Thus investors keen on riding the solid prospects should definitely consider adding transportation stocks to their portfolio. While investing in individual stocks could be an option, a more convenient way to invest in transportation stocks is to do it in basket form. Thus a look at the top ranked transportation ETF could be a good way to target the best of this segment.

About the Zacks ETF Rank

The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook for the underlying industry, sector, style box or asset class.

The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, the Zacks ETF Rank reflects the expected return of an ETF relative to other products with a similar level of risk.

For investors seeking to apply this methodology to their portfolio in the Transportation space, we have taken a closer look at the top ranked SPDR S&P Transportation ETF (NYSEARCA:XTN). This ETF has a Zacks ETF Rank of 1 or ‘Strong Buy’ and is detailed below.

XTN in Focus

XTN tracks the S&P Transportation Select Industry Index to provide exposure to the transportation sector. The fund holds a basket of 48 stocks and uses an equal weighted methodology. As such, the ETF nicely spreads out its assets among individual holdings and each security accounts for less than 3% of the total fund allocation.

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