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This transport stock holds the key to earnings season

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ETF Edge: Transports hit the brakes

It's been a wild ride for transportation stocks.

The group, which consists of high-profile names like FedEx and UPS as well as trucking plays like J.B. Hunt, has seen significant declines since last year, with FedEx shedding more than 30% since Sept. 1.

Tracked by the iShares Transportation Average ETF, ticker IYT, one of the most closely followed exchange-traded funds on Wall Street, the group is now back in focus with J.B. Hunt set to report earnings after Monday's closing bell.

And, if you ask ETF experts, there are several key items investors should be watching.

"I think trade's the big deal here, and it's probably going to be negative," Tom Lydon, editor and proprietor of ETFTrends.com and president of Global Trends Investments, said Monday on CNBC's "ETF Edge."

Noting that the top two holdings in the IYT are actually railroad stocks, which are more domestically focused than the shipment plays, he said the "IYT is almost performing as well as the S&P [500] so far year to date, but if you look at ... the shippers, they've kind of been stopped in their tracks — forgive the pun."

For Ric Edelman, co-founder and chairman of Edelman Financial Engines, there's something deeper going on in the transport group that's worth investors' attention.

With FedEx struggling to eke out gains this year while the S&P hits all-time highs, "it demonstrates that no individual stock is safe," Edelman, who was ranked No. 1 independent advisor in the country by Barron's three times, said in the same "ETF Edge" interview.

"You need to recognize that it creates opportunities at the same time, if you are so inclined to take advantage of those market movements," he said. "But the real key is that the transport industry is increasingly a commodity, even a brand like FedEx. I don't really care. I want to get my package from here to there and I'm going to do it [via] whoever's going to provide that service cheaper and faster, and brand really doesn't matter anymore."

When it comes to trade, Edelman wasn't quite as concerned as Lydon, saying that "there's no question" that the Trump administration's tariffs on Chinese goods "are temporary."

"There's no way that the governments around the world are going to tolerate this. We're seeing dramatic reduction in productivity," he said. "China's already suffering the biggest losses in its gains over decades now. The U.S. is beginning to be harmed, and when we move into the election, there's no way that the government's going to sustain this activity."

If he's right, Lydon suggested one way to capitalize on the potential resolution.

"If this trade deal gets done, there is going to be some great upside, not just here in the U.S., but especially overseas," he said. "I'd look to emerging markets. We saw the trade numbers and how bad[ly] they're impacting China today. Boy, there's going to be great opportunity in the future."

Both J.B. Hunt's stock and IYT dropped less than 1% Monday. FedEx was up less than 1%.

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