USO

United States Oil Fund

81.67
USD
1.64%
81.67
USD
1.64%
43.42 92.20
52 weeks
52 weeks

Mkt Cap 15.14B

Shares Out 185.36M

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Fly Away From The JETS ETF

Summary The U.S. Global Jets ETF is a popular way to play price trends in the airline industry. This concentrated fund has a lofty valuation and faces technical headwinds. Despite optimism from airline CEOs regarding retail and business travel trends, price and valuation suggest a bumpy ride ahead. Some of the most bullish comments over the last earning season were from airline CEOs. The execs were incredibly optimistic regarding the pickup in travel demand from consumers, while expectations for a return to normal regarding business trips were also voiced in April. Moreover, there are anecdotes everywhere you turn about how flights are absolutely packed to the brim. Also consider that airline ticket prices surged 18% in the April CPI report vs the March price index, according to the Bureau of Economic Statistics. Couple high ticket prices with airplanes packing folks in like sardines, and you might have a very bullish setup for airline stocks. What Could Go Wrong? There are risks though. What about rising jet fuel prices? Are there cracks in the consumer? Is the summer of 2022 simply two years of pent-up demand? JETS ETF Let's dive into the U.S. Global Jets ETF (NYSEARCA:JETS). First off, as legendary mutual fund manager Peter Lynch quips, "Know what you own, and why you own it." JETS is a very concentrated fund. It's about 45% weighted in just four stocks: United Airlines (UAL), American Airlines (AAL), Delta (DAL), and Southwest Airlines (LUV), according to USGlobalETFs.com. The ETF features a 0.60% expense ratio, but liquidity is strong with just a 0.05% bid-ask spread, per USGlobalETFs.com JETS Holdings: Concentrated Airline companies are in the Industrial sector. Drilling down further, you'll find they are a key part of the transportation industry - often seen as a bellwether for the overall market and economy. After all, Dow Theory states that the Dow Jones Transportation Index (IYT) is an important barometer for broad market breadth and health. Shares of IYT (chart below) remain 15% off their all-time high despite an impressive rebound off last week's low. FINVIZ: S&P 500 1-Month Stock Performances The valuation picture isn't pretty in my opinion. According to Morningstar, the ETF's holdings have an average P/E ratio near 30x. So, you are paying up for anticipated growth earnings from within the niche. You are not getting paid to wait either - the dividend yield is paltry, per Morningstar. Morningstar: JETS Is Not Cheap Finally, the technical take shows a pronounced downtrend in JETS. The "overhead bin" on the chart is packed with supply - that means investors will likely look to dump shares on rallies to the $27 area. The runway is to the bearish side as the ETF did not see much of an earnings bounce over the last month. One last technical point - the RSI on the weekly chart below is in a bearish zone. Don't get excited about taking a trip on this ETF. Perhaps you can dip your toe into JETS around the old 2020 gap near the $13-$14 area. JETS: 6-Year Weekly Chart With RSI I am bearish on the JETS airline ETF. The valuation is not compelling, there's a low yield, it's not the cheapest fund around, and the chart looks weak in this technician's eye. This article was written by CFA & CMT Charterholder | Freelance Financial Writer at SoFi & Ally | Investments | Markets | Personal Finance | RetirementI create written content used in various formats including blogs, emails, white papers, and social media for financial advisors and investment firms in a cost-efficient way. My passion is putting a narrative to financial data. Working with teams that include senior editors, investment strategists, marketing managers, data analysts, and executives, I contribute ideas to help make content relevant, accessible, and measurable. Having expertise in thematic investing, market events, client education, and compelling investment outlooks, I relate to everyday investors in a pithy way. I enjoy analyzing stock market sectors, ETFs, economic data, and broad market conditions, then producing snackable content for various audiences. Macro drivers of asset classes such as stocks, bonds, commodities, currencies, and crypto excite me. I truly enjoy communicating finance with an educational and creative style. I also believe in producing evidence-based narratives using empirical data to drive home points. Charts are one of the many tools I leverage to tell a story in a simple but engaging way. I focus on SEO and specific style guides when appropriate. My CFA and CMT backgrounds demonstrate prowess in investment management and my professional experience includes extensive public speaking and communication. Moreover, my extensive university teaching and professional trading experience provide useful skills. Past roles also include heavy use of Excel modeling and chart creation as well as PowerPoint.I am a contributor to Topdown Charts. Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Comment

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