Flying High With the Airlines When They Take Off Again
Airline stocks have been essentially grounded, for very good and obvious reasons.
But, like the rest of the stock market, as the airlines see the economy opening up, as the TSA tells us there are more travelers every day, as investors rotate into cyclical sectors and beaten down stocks, tarmac tied airline stocks should benefit, big time.
That said, timing the rise of airline stocks and choosing individual names isn’t the easiest game in town.
The U.S. Global Jets ETF (JETS) is well worth looking at, if not taking a long-term position in.
This isn’t a new ETF that was put together so investors could suddenly jump into the beaten down sector. The JETS ETF has been around since 2015. But saying it’s been overlooked would be like calling the Grand Canyon a ditch.
No-one paid much attention to JETS, until it became a highflier recently.
Up until early March the fund had only about $33 million under management, that is tiny for an ETF.
As an investment or trading vehicle it was too small for me or my subscribers to bother with, primarily because of its thin daily volume and spreads that were too large to make getting in or out tenable.
That’s all changed.
$937 Million in 62 Days
As of today, JETS has grown to more than $970 million under management, having seen inflows over the past 62 consecutive trading days, according to FactSet.
Even better, daily volume’s been in the multi-million share range, which dramatically narrowed bid and ask spreads, and makes getting in and out of positions a breeze.
Besides those qualities the ETF sports an expense ratio of just 0.60%.
JETS, the ETF, tracks a proprietary index, namely the “U.S. Global Jets Index” which the ETF was built around. According to the fund’s prospectus, “The Index tracks the performance of Airline Companies across the globe with an emphasis on domestic passenger airlines. The universe of Airline Companies is screened for investibility (e.g., must be listed on a securities exchange), a minimum market capitalization of $100 million, and liquidity (minimum average daily value traded).”
The fund has some interesting concentration features based on how the Index is reconstituted quarterly. In other words, the Index isn’t static, it changes, so the make-up of the stocks in the ETF changes too.
The Fund says it generally expects the Index to include between 30 and 35 airline companies, but it allocates 48% of the Index and ETF to “each of the four largest U.S. passenger airline companies, as measured primarily by their market capitalization and, to a lesser extent, their passenger load factor.” Each of those stocks receives a 12 percent weighting allocation of the Index, and in the ETF.
The Index is rebalanced and reconstituted quarterly in March, June, September, and December.
According to a May 28, 2020 Supplement to the Summary Prospectus, dated April 30, 2020,
“At the time of each reconstitution of the Index, Each of the next five largest U.S. passenger airline companies receives a 4 percent weighting allocation of the Index. The remaining Airline Companies meeting the Index criteria are then scored based on multiple fundamental factors. Their score is primarily driven by their cash flow return on invested capital (CFROIC) with additional inputs based on sales per share growth, gross margins, and sales yield. Each of the four U.S. companies with the highest composite scores receives a 3 percent weighting allocation of the Index, and each of the twenty non-U.S. companies with the highest composite scores receives a 1 percent weighting allocation of the Index.”
While most investors probably think JETS is a “passive” fund, the way the Index and ETF are rebalanced it’s actually a very “smart beta” fund, and I like that a lot.
The Airline Industry WILL Rebound… and That Will Take JETS Sky High
There’s no doubt the airlines are all hurting, and in my opinion will need a lot more government support. But they are national assets and indispensable.
They might get more beaten up, and the government might take stakes in them for equity or extract warrants against more loans they need. I just know, in the end, they will survive, most of them for sure.
The fact that JETS rebalances its portfolio makes it a safer bet if some airlines are going to be grounded longer or end up failing to takeoff ever again.
Long-term the airlines are going to fly high again, and JETS is a good long-term way to take that ride with them.
Check it out.
An Alternative to the Publicly-Traded Rally
Some investors may call the airline industry – no matter how big the company – “speculative,” I am not one of those guys.
Airlines aren’t going anywhere. The smaller ones may fail, they may consolidate, but the accessibility of flying has shrunk our world and grown our economy on a global scale.
That being said, I understand if you’re wary of dipping your toes into the airline industry right now.
In fact, I understand if you’re wary of investing in anything publicly-traded right now. We’re in the middle of a rally, but what goes up must come down, at least sometimes, and that uncertainty can be scary.
What if I told you that you could avoid the public markets altogether?
There’s a way and an incredible opportunity that my partners over at the National Institute for Cannabis Investors have discovered. For as little as $1, you could get in on a once-in-a-lifetime opportunity in the cannabis market.
It’s another burgeoning market, and that means it has unlimited untapped potential.In fact, depending on the size of the stake you put down, you could be looking at $2.3 million in returns.
The guys at The Institute have crunched the numbers for me, and to say this opportunity is big is an understatement. You may only get a chance like this once every ten years.
I’ve made my case for the “speculative” airline industry, now I want you to take a look at another “speculative” industry: cannabis.
This is potentially the largest private cannabis deal I’ve ever seen, and it could bring you absolutely unprecedented wealth… but only if you get in now.
Once this deal opens to the public, it will already be too late. You need to get in now (for as low as $1) to really reap the rewards. All $2.3 million worth of them.
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Airlines or cannabis… no matter which you choose, you’ll be looking at a wave of wealth before long.
Don’t miss out.