Transportation Sector and Transportation Industry Investments

What Is the Transportation Sector?

The transportation sector is a category of companies that provide services to move people or goods, as well as transportation infrastructure. It is a sub-group of the industrials sector according to the Global Industry Classification Standard (GICS). The transportation sector consists of industries including air freight and logistics, airlines, marine, road and rail, and transportation infrastructure. These industries are further broken down 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

• The transportation sector is an important industry that deals with the movement of people and products.
• These companies include airlines, trucking, railroads, shipping, and logistics firms, as well as those that provide transportation infrastructure.
• The Dow Jones Transportation Index (DJTA) was the U.S.’s first stock market index and still tracks 20 of the most important companies in the sector.

Understanding the Transportation Sector

The performance of companies in the transportation industry is highly sensitive to fluctuations in company earnings and the price of transportation services. Factors affecting company earnings include fuel costs, labor costs, demand for services, geopolitical events, and government regulation. Many of these factors are interconnected. For example, if the U.S. government passes regulations that make it more difficult for people to earn their commercial drivers’ license, this will reduce the supply of drivers and drive up the cost of hiring them.

Oil prices are a key factor for transportation as they generally influence transportation expenses. Rising gas and fuel prices increase costs for trucking companies, reducing their profit and potentially lowering their stock price.

Energy costs and the value of transportation stocks are interrelated. Low energy costs may boost the share price of transportation companies, but the influence can also be reversed. When demand for transportation services is high, it will be reflected in quarterly reports of transportation companies. This information may motivate energy traders to bid up prices for oil and similar commodities. However, if demand for commercial transportation falls, this information could lead to a decline in oil prices as well.

Investing in the Transportation Sector

You can invest in companies that move people and products by buying shares of individual transportation companies or through sector-specific mutual funds or exchange-traded funds (ETFs) that specialize in the transportation sector. The transportation sector is one of the most broadly diversified with industrial companies representing airlines, railroads, truckers, equipment and leasing stocks, and logistics companies. Funds that track this sector will follow a benchmark sector 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 United States. The DJTA is the oldest U.S. stock index, first compiled in 1884 by Charles Dow, co-founder of Dow Jones & Company. The index initially consisted of nine railroad companies and two non-railroad companies. In addition to railroads, the index now includes airlines, trucking, marine transportation, delivery services, and logistics companies.

Ticker	Company
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

Additionally, the S&P Transportation Select Industry index provides a secondary benchmark for the sector.

Number of Constituents	42
Inception Date	June 18, 2006
Maximum Market Cap	81,926.05
Minimum Market Cap	423.22
Mean Market Cap	8,861.79
Median Market Cap	2,543.45