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ETFs & Stocks to Gain on Record Thanksgiving Travel

Sweta Killa
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A higher number of Americans are gearing up for Thanksgiving travel by road or air this time encouraged by a healthier economy, rising income, higher consumer confidence and cheap fuel. The frenzy for trips during the Thanksgiving weekend is far more than the other years. Orlando, FL is expected to be the top destination, followed by Anaheim, CA and New York City, NY.

According to travel service provider American Automobile Association (AAA), Thanksgiving holiday travel is expected to hit levels not seen in 12 years. As many as 50.9 million Americans will travel this Thanksgiving holiday period (Nov 22-Nov 26), up 3.3% from last year. Of them, 45.5 million will go on a road trip with a 3.2% rise in automobile travel, 3.95 million will fly, and the rest will travel by trains and other modes (including buses and cruises) (read: 5 Sector ETFs for Revenue Growth Play).

Though the road trip is expected to rise 3.2% over last year, drivers are expected to pay the highest gas prices since 2014. This year, national average price is $2.54, which is 37 cents more than last Nov 1-14.

Another report from the U.S. airlines group Airlines for America (A4A) shows that a record 28.5 million passengers will fly over the 12-day Thanksgiving holiday travel period (Nov 17-Nov 28), up 3% from last year. Travelers taking to the skies will pay the lowest average in five years for a round-trip flight for the top 40 domestic routes, per AAA’s Leisure Travel Index. Airfares are likely to drop 23% year over year to $57 on average.

In order to accommodate an increased number of passengers, U.S. airlines will increase the number of seats. A4A expects airlines to offer 86,000 more seats, 3.2% higher than the last Thanksgiving (read: Will Airline ETF Crash on Subdued Q3 or Take Off on Value?).

Huge travel demand should boost revenues and profitability for airlines and railroads, thereby leading to higher share prices. Investors shouldn’t miss this opportunity and could tap this trend through ETFs and stocks that stand to profit big time from the upbeat Thanksgiving travel trend.

How to Play with ETFs?

iShares Transportation Average ETF IYT

The fund tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 20 securities. It is heavily concentrated on the top firm FedEx FDX at 14.1% while other firms account for less than 8.4% share. From a sector perspective, air freight & logistics takes the top spot with 31% of the portfolio while railroads, airlines and trucking round off to the next three spots with double-digit exposure each. The fund has accumulated nearly $772.4 million in AUM while sees solid trading volume of around 239,000 shares a day. It charges 44 bps in annual fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: Q3 Earnings Drags Transport ETFs Lower).

SPDR S&P Transportation ETF XTN

This fund tracks the S&P Transportation Select Industry Index, holding 43 stocks in its basket with none holding more than 3.26% of assets. About 30.8% of the portfolio is dominated by trucking, while airlines takes 27.1% share. Airfreight & logistics, and railroads also make up for a double-digit allocation each. With AUM of $184.7 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 21,000 shares a day. XTN has a Zacks ETF Rank #4 with a High risk outlook.

First Trust Nasdaq Transportation ETF FTXR

This fund offers exposure to the 30 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. Each firm hold less than 9.3% share in the basket. FTXR has accumulated $3.6 million in its asset base and charges 60 bps in annual fees. Average trading volume is meager at 1,000 shares. The ETF has a Zacks ETF Rank #4.

U.S. Global Jets ETF JETS

This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 34 securities that are heavily concentrated on the top four firms with around 12% allocation each. Other firms hold less than 4.4% share. The fund has gathered $105.4 million in its asset base while sees moderate trading volume of nearly 62,000 shares a day. It charges investors 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: A Sumptuous Spread of ETFs & Stocks for Thanksgiving).

How to Play with Stocks?

SkyWest Inc. SKYW

Based in St. George, UT, SkyWest operates a regional airline in the United States. Its earnings are expected to grow 30.1% for the holiday quarter and revenues will likely see modest growth of 1.6%. The stock has a Zacks Rank #1 and a VGM Style Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwest Airlines Co. LUV

Based in Dallas, TX, Southwest Airlines operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. The company is expected to see earnings and revenue growth of 12% and 2.6%, respectively, for the holiday quarter. The stock has a Zacks Rank #3 and a VGM Style Score of B.

USD Partners LP USDP

Based in Houston, TX, USD Partners is engaged in acquiring, developing and operating energy-related rail terminals and other midstream infrastructure assets and businesses in the United States and Canada. Its earnings are expected to grow at a rate of 58.8% for the holiday quarter while revenues will increase in mid-single digits. USDP has a Zacks Rank #3 and a VGM Style Score of A (see: all the Industrials ETFs here).

Norfolk Southern Corporation NSC

Based in Norfolk, VA, Norfolk Southern is engaged in the rail transportation of raw materials, intermediate products, and finished goods in the United States. Its earnings and revenues are expected to grow 9.6% and 4.7%, respectively, for the holiday quarter. The stock has a Zacks Rank #3 and a VGM Style Score of B.

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