Strong Traveler Volume Amidst Mixed Industry Momentum
The travel sector continues to thrive, as evidenced by a significant increase in air travel. However, despite promising early results from United Airlines and anticipation of positive reports from other airlines, I recommend maintaining a hold rating on the U.S. Global Jets ETF (JETS).
While JETS appears undervalued based on its price-to-earnings ratio, its momentum has been weak in the intermediate term. Additionally, its expense ratio is high, and the ongoing market correction poses a challenge.
JETS ETF: Concentration and Valuation
JETS is a highly concentrated ETF, with its top four holdings accounting for over 40% of its weight. This includes major airlines such as UAL, DAL, AAL, and LUV. As such, it is crucial to monitor these companies’ fundamentals and momentum.
The ETF’s value proposition is based on its low valuation. However, investors should be aware of its substantial exposure to airlines, which may be sensitive to factors such as fuel prices.
Technical Outlook and Seasonal Trends
JETS’ technical chart indicates a lackluster outlook. Shares have traded sideways in the last two years, with a long-term 200-day moving average that is flat. Furthermore, the ETF has been underperforming over the past 12 months.
Seasonally, JETS has historically underperformed through October. This is a trend to consider, as it may limit potential upside during this period.
Conclusion
In light of the aforementioned factors, I maintain a hold rating on JETS. While the industry may experience cyclical upswings, the ETF’s weak momentum, high expense ratio, and concentration create challenges. Investors should proceed with caution and consider these factors before making investment decisions.
