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ETFs & Stocks to Gain Height on Busy Air Summer Travel

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Thanks to rising U.S. GDP, robust job gains, moderate wage growth, all-time high household net worth and low airfares, a higher number of Americans are gearing up for more air travel. With just a few days left for the sunny season, the frenzy for trips during the holidays is really more this time than in many years.

This is especially true as the report from the U.S. airlines group, Airlines for America (A4A), shows that air travel is expected to reach an all-time high this summer (June–August). About 234.1 million passengers (2.54 million per day) would fly over the three-month period, up 4% from last year. In order to accommodate 100,000 additional daily passengers during this period, U.S. airlines will likely add new flights and increase the number of seats. A4A expects airlines to add 123,000 more seats per day across their networks.

Per the latest report of U.S. Energy Information Administration (EIA), regular gasoline retail prices are forecast to average $2.39 per gallon this summer driving season (April through September) compared with $2.23 per gallon last summer. The increase will primarily be driven by higher crude oil prices (read: Saudi, Russia Boost Oil Price: Bet on Leveraged ETFs).

Huge travel demand should boost revenues and profitability for the airlines, thereby leading to skyrocketing 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 summer travel trend.

ETF Picks

U.S. Global Jets ETF (JETS - Free Report)

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 at least 12% allocation each. Other firms hold less than 4.01% share. The fund has gathered $72.8 million in its asset base while sees moderate trading volume of nearly 49,000 shares a day. It charges investors 60 bps in annual fees and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: After Mixed Earnings, Why Airlines ETF is Flying Higher).

iShares Dow Jones Transportation Average Fund (IYT - Free Report)

While this ETF provides exposure to the broad transportation sector by tracking the Dow Jones Transportation Average Index, airlines account for one-fourth of the portfolio. The fund holds a small basket of 20 stocks with heavy concentration and dominance in the top firm. It has accumulated $840.8 million in its asset base while sees a good trading volume of around 374,000 shares a day. It charges 43 bps in fees and expenses and has a Zacks ETF Rank of 1 or’ Strong Buy’ rating.

SPDR S&P Transportation ETF (XTN - Free Report)

This fund also targets the broader transport sector and follows the S&P Transportation Select Industry Index. Holding 45 stocks in its basket with AUM of $179.4 million, it is well spread out across various components with none holding more than 3.05% of assets. About 31.5% of the portfolio is dominated by trucking while airlines takes 28% share. The fund charges 35 bps in fees per year from investors and trades in a light volume of nearly 60,000 shares a day. XTN has a Zacks ETF Rank of 1.

Stock Picks

SkyWest Inc. (SKYW - Free Report)

This Utah-based company operates one of the larger regional airlines in the United States. It saw rising earnings estimate of 12 cents for this year over the past 90 days with an expected growth of 16.3%. The stock has a Zacks Rank #2 (Buy) with a VGM Style Score of A.

Copa Holdings S.A. (CPA - Free Report)

This Panama-based company is a leading Latin American provider of passenger and cargo service. It saw solid earnings estimate revision of 80 cents for this year over the past 90 days with an expected growth of 70.7%. The stock has a Zacks Rank #3 with a VGM Style Score of A (read: Invest Like Warren Buffett with These ETF Strategies).

Alaska Air Group Inc. (ALK - Free Report)

This Washington-based company provides passengers and cargo air transportation services primarily in the United States. The stock saw positive earnings estimate revision of 14 cents for this year over the past 90 days with an expected growth of 7.8%. It has a Zacks Rank #3 with a VGM Style Score of A.

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