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The Railway Industry has experienced tremendous growth in recent years. Much of this growth can be attributed to rising transportation prices that have been bolstered by rising energy costs and increasing demand to move coal, a material that railroads are uniquely outfitted to ship. In 2005, wagon orders were the highest for seven years, at 80793 units. Deliveries totalled 68687, according to figures complied by the Railway Supply Institute. Also, short line carload traffic increased by 7.1 percent in the first 39 weeks of 2005 over the same period in 2004.
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This growth has been reflected in the rising price of the iShares Dow Jones Transportation Average (AMEX: IYT). The fund has had a 27.85 and 10.87 percent return in 2004 and 2005 respectively. It includes a blend of growth and values stocks mostly concentrated in Mid Caps, and with an expense ratio of .60 percent it is significantly cheaper than rival funds. 84.52 percent of the fund is invested in Industrial Transportation, while 11.43 percent and 3.93 percent are invested in Travel and Leisure and Support Services.
Industry watchers believe the rail industry is poised to continue its recent gains. On January 27, Merrill Lynch analyst Ken Hoexter noted that “more upside appears to exist in the rails due to the stamina of the current pricing renaissance,” while on January 23, Morgan Stanley analyst James Valentine reported his belief that the stocks of the largest North American railroads will gain 50 percent to 100 percent during the next four years.
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Performance:
| |
IYT* |
| Jan-06 |
3.59 |
| 2005 |
10.87 |
| 2004 |
27.85 |
