Investing in Transportation

There’s more than one way to skin a cat. Despite the fact that transportation is its own sector in the stock market, you can invest in transportation in numerous ways. Here are three subsectors to help diversify your portfolio without straying too far from your comfort zone.

1. Investing in transportation via railroad companies

Shipping stocks may be down in response to the fiasco in the Suez Canal, but railroad stocks are maintaining their momentum. The U.S. railroad system is responsible for more than a quarter of all freight that moves within the country.

Some of the biggest stocks for the railroad industry include Kansas City Southern, which was recently acquired by Canadian Pacific. Existing Kansas stock (trading under “KSU” on the NYSE) will transition to Canadian (“CP” on the NYSE). New investors should opt for CP, which is up 5.63% YTD with trailing 12-month returns of 67.84%. There’s also BNSF Railway, owned by none other than Warren Buffet’s Berkshire Hathaway. BNSF is the biggest railroad network in North America. Investors can go for Berkshire’s “BRK.A” on the NYSE to get a taste of 81.49% five-year earnings.

2. Consider travel technology

It seems like there’s a techy subsector for just about everything. This includes fintech, martech and—yes—even travel tech. There’s a really cool exchange-traded fund (ETF) caled the ETFMG Travel Tech ETF (which goes by the clever ticker “AWAY”).

AWAY maintains $258.5 million in assets under management. The expense ratio is slightly high at 0.75%, but a high average daily trading volume as well as an impressive trailing 12-month return of 117.45% makes it a solid choice. AWAY is fairly new (having just gone public in 2020) but the fact that it’s a basket of securities rather than a single startup makes it more approachable for the average retail investor.

3. Take the wheel with autonomous driving

Click to View Autonomous Driving

Perhaps the nation’s leader in vehicle autonomy is a company called Waymo. Founded in 2009 by CEO John Krafcik, it wasn’t long before Google bought the company. 

Google, which trades under their corporate name Alphabet (“GOOGL” on Nasdaq) is currently the best way to invest in Waymo since it’s an arm of the brand. However, their recent $2.25 billion funding round from late-stage venture capital firms shows there’s potential for Waymo to go public on their own. As they continue to develop their driverless taxis and expand their urban pilot programs, Waymo will be one to watch.

Should you go for a fund or opt for individual stocks when investing in transportation?

Investing allows you to pick individual stocks or go for funds (like ETFs or mutual funds, for instance). In reality, you don’t have to pick one or the other. You can balance your portfolio with both.

ETFs offer tax incentives and diversification that individual stocks do not. However, there’s potential for great returns with stock picking. When you are picking individual stocks, consider prioritizing “blue-chip” securities, or ones that have been around awhile and proved themselves in the consumer and investment markets. 

For example, the aforementioned Google is definitely a blue-chip stock. Despite the fact that Waymo is more of a novelty, they’re backed by a household name that’s pretty reliable in the long-term market. Since 2016, shares have gone up 165.8 percent.

All in all, investing in transportation can be done in a plethora of ways. These three options are just the tip of the iceberg.