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| Dow Jones Transportation Average |
Overview:
The Dow Jones Transportation Average (DJTA) is the most widely recognized gauge
of the transportation sector. It is also the oldest index used today, even older
than its more famous brother, the Dow Jones Industrials (DJIA). The
Transportation Average was the first stock index developed by Charles Dow in
1884. At inception, the index held only nine stocks (all railroads). In 1896 it
was modified to include 20 “active” stocks, including 18 railroads. (As you
can probably guess, automotive and airline stocks were not added to the index
until much later.) The index is often referred to simply as the Dow Jones
Transports.
Composition:
The Dow Jones Transportation Average is composed of 20 stocks that are chosen to
represent the transportation industry. Like other Dow Jones Averages, it is a
price-weighted index. This means that a firm's weighting in the index is
determined by its share price, not by its market capitalization.
The table below lists the components of the Dow
Jones Transportation Average along with the weighting that each stock carries in
the average (data as of August 2004):
| Company |
Symbol |
%
of Index |
| FedEx |
FDX |
11.5% |
| United Parcel Service |
UPS |
10.4% |
| Union Pacific |
UNP |
8.1% |
| Expeditors Intl. of
Washington |
EXPD |
7.0% |
| Ryder System |
R |
6.4% |
| C.H. Robinson Worldwide |
CHRW |
6.3% |
| Yellow Roadway |
YELL |
6.2% |
| CNF Inc. |
CNF |
5.9% |
| J.B. Hunt Transport Services |
JBHT |
5.3% |
| Burlington Northern Santa Fe |
BNI |
5.1% |
| USF Corp. |
USFC |
5.1% |
| Alexander & Baldwin |
ALEX |
4.6% |
| CSX Corp. |
CSX |
4.5% |
| Norfolk Southern |
NSC |
3.9% |
| GATX Corp. |
GMT |
3.6% |
| Southwest Airlines |
LUV |
2.0% |
| Continental Airlines |
CAL |
1.2% |
| Northwest Airlines |
NWAC |
1.1% |
| AMR Corp. |
AMR |
1.1% |
| Delta Air Lines |
DAL |
0.5% |
Positives:
The DJTA has the longest track record of any index. It is a good proxy for
tracking the general performance of U.S. transportation stocks.
Drawbacks:
Though it is the oldest index used today, few non-professional investors
actually track the performance of the Dow Jones Transports. As the economy has
become more technology and service based, this index has lost some of its
prominence in financial discussion. As noted earlier, it is also a
price-weighted index, and many investors question the interpretation of indices
weighted in this fashion.
How can I trade/invest in this index?
You can invest in the Dow Jones Transportation Index through either options,
futures, or several funds. Our favorite way to trade the transports is through
an investment in the iShares Dow Jones Transportation Fund (IYT)--an
exchange-traded fund (ETF) that tracks the performance of this index. IYT almost
perfectly tracks the Dow Jones Transports, can be easily traded throughout the
day just like a common stock, and sports a low 0.6% expense ratio.
Additional Information:
iShares
Dow Jones Transportation Average (IYT)
Dow
Jones Averages Homepage
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