ETF NEWS - ULTUMUS

Transport Thematic ETF

Written by Bernie Thurston | 26 January 2022

Shipping and air freight ETF

US Global Investors, a Nasdaq-listed asset manager with a market cap of $75 million, has launched its third ETF.

 

The US Global Sea to Sky Cargo ETF (SEA) will track the US Global Sea to Sky Cargo Index, using a self-indexed approach.

 

SEA will invest in global sea shipping and air freight companies from developed and emerging markets. Companies are chosen based on market capitalisation and value. Value is calculated by looking at companies’ PE and PB ratios, as well as their return on capital. 

 

Cargo shipping companies can take up to 70% of the fund. Air freight and courier companies take the remaining 30%.

 

SEA charges 0.70%.

 

Analysis – following JETS

US Global Investors has hit success recently with its airlines ETF, the US Global Jets ETF (JETS). JETS, which invests in global airline businesses such as Delta Airlines, Air Canada, Ryanair, and Air Canada, surged in popularity during the covid panic in March 2020 as investors used it to buy the dip on airlines. JETS later became available in Europe via HANetf.  

 

The launch of SEA represents something of a continuation on the theme. However, there is a few things to keep in mind.

 

Shipping is a bit of a boom-and-bust industry. Shipping has boomed in the past 12 months, on the reopening trade. This has meant that the average global rate to ship a 40-foot container was 3x higher in December 2021 compared with December 2020, according to data from US Global Investors. Meaning it is hard to know if the market is peaking now, or if higher profitability is here to stay.

 

Another thing to keep in mind is that this niche has been tried unsuccessfully before. This ETF isn’t the first to use the ticker SEA and target this niche. The Invesco Shipping ETF (SEA), which invested in shipping companies from developed countries, closed in 2020.

 

In USGI’s defence, the two strategies are different.  So we’ll have to sea how this goes.