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An ETF With A Futuristic View Of Transportation

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May 4, 2018 1:54 pm
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An ETF With A Futuristic View Of Transportation

For investors, the future of transportation is already here. Just this year, several exchange-traded funds focusing on the electric vehicle theme have come to market.

The new age transportation landscape encompasses more than just electric vehicles and there are some ETFs that can help investors tame that sprawling space. One example is the SPDR Kensho Smart Mobility ETF (NYSE:XKST).

What Happened

XKST, which tracks the Kensho Smart Transportation Index, debuted in December as part of a suite of Kensho-based ETFs launched by State Street Global Advisors (SSgA).

The ETF's underlying index “is designed to capture companies whose products and services are driving innovation behind smart transportation, which includes the areas of autonomous and connected vehicle technology, drones and drone technologies used for commercial and civilian applications, and advanced transportation tracking and transport optimization systems,” according to SsgA.

Why It's Important

A case can be made that XKST is a “right place, right time” ETF.

“Technological innovation is fundamentally changing the concept of travel and transportation,” said SSgA in a recent research note. “A new era of transportation that could move people and goods faster, cheaper and more efficiently is emerging through autonomous vehicles, mobility sharing and drones. This innovation, illustrated below, will not only transform our way of life, but also provide a secular growth opportunity for investment portfolios.”

XKST holds 35 stocks and that roster is spread across over a dozen industry groups, giving the ETF broad-based exposure to tomorrow's transportation trends. Avis Budget Group, Inc. (NASDAQ:CAR) and NVIDIA Corp. (NASDAQ:NVDA) combine for over 11 percent of the fund's weight.

What's Next

While electric vehicles are a tangible, marquee driver of future transportation trends, there are more themes for investors to consider. One of those themes is shared mobility.

“Revenue is expected to grow 16 percent annually, reaching $109 billion in 2022,” said SSgA. “Software-based and data-driven mobility sharing services also create additional demand for vehicle connectivity services, such as navigation, vehicle tracking, remote control and software upgrades.”

Drones, another theme accessible via XKST, is another arena with robust growth expectations.

“According to Goldman Sachs Research, spending on commercial/civilian drones is estimated to reach $13 billion between now and 2020,” said SSgA.

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