Transportation ETFs: Are Investors Rotating Out?
24 March 2010 at 1:01 am by Gary Gordon
The iShares DJ Transportation Average Fund (IYT) gained 0.59% on Tuesday, March 23. Yet IYT ended the day with $87 million less in assets under management. The outflow represented 17.5% of total assets leaving the fund in a single trading session.
Now add share volume into the equation. Volume for the S&P 500 was entirely average on Tuesday. Yet the volume on IYT was 2.25x greater than normal.
Extraordinary trading volume and/or exceptional selling into strength (buying into weakness) often signifies a turning point. Indeed, the last time that the iShares DJ Transportation Average Fund (IYT) had this much trading volume was in the 1st week of February… smack in the middle of the correction’s bottom.
It appears most of the outflow came from block trading activity from institutional investors. And while it is difficult to assess the significance of advisers selling nearly 1/5 of IYT’s total assets into the teeth of the cyclical bull, let alone 2.25x the normal trading activity, it’s clear that some folks believe it is time to take profits.
IYT already trades slightly above its average 5-year P/E. (See “Trailing P/E Ratios of iShares Sector Funds.”), Perhaps the trading activity is indicative of April’s earnings expectations; that is, the “E” for transporters may not be able to keep pace with the current ”P.”
Or perhaps this has little to do with the bull market stalling out, and more to do with sector rotation. Transports have been big time outperformers. Maybe a shift to underperforming segments like iShares Energy (IYE) is in the works.
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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
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