ETF Showdown: Flying The Crowded Skies

Think for a minute about all of the industry groups that ETFs offer exposure to. Then think about some that are arguably under-represented or not represented at all in the ETF universe. There's only one casino and gaming ETF out there. Auto companies such as Ford

and General Motors

don't yet have an ETF to call home. Only recently did ETF investors gain exposure to the smartphone craze, a trend that started well before that ETF came to market. And unfortunately for short-sellers, there are no Greece or Portugal-specific ETFs out there. Simply put, there are still some niches that need to be filled, but one that looks a little crowded is the airline sector, the stomping ground for this week's ETF Showdown. One airline ETF is probably enough, but there are two: The Guggenheim Airline ETF

and the Direxion Airline Shares

. The tepid investor response to these ETFs is highlighted by their respective assets under management and daily trading volume. Add up those stats for FAA and FLYX and you get less than $30 million in AUM and about 31,000 shares per day. That would be acceptable for ONE NEW ETF, but in the case of FAA, it is 28 months old and has AUM of just $24.7 million and volume of less than 30,000 shares per day. Introduced in December, FLYX's numbers are obviously far more paltry. This isn't a slight at either issuer because both Direxion and Guggenheim have plenty of worthwhile ETFs in their respective stables. FAA and FLYX just aren't among them. Both ETFs hold roughly 20 stocks, but in dramatically different fashion. Southwest

, United Continental

and Delta

account for almost 50% of FAA's weight. To its credit, FLYX is far less concentrated in just a few stocks and it has the lower expense ratio of the pair at 0.55% compared to 0.65% for FAA. FLYX also deserves the nod in terms of performance. Since that fund came to market in December, it's “only” down 7% compared to a 15% over the same time for FAA. Both performances are terrible when considering the SPDR S&P 500

delivered over 9% during the same time frame. Airline ETFs are good for something though: A pairs trade with oil, as in long oil/short airlines. Or vice versa on days when oil is down. So we're talking about trading vehicles here and that means we'll give a slight nod to FAA due to its superior liquidity and bigger trading ranges.