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Is SPDR S&P Homebuilders ETF (XHB) a Strong ETF Right Now?
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The SPDR S&P Homebuilders ETF (XHB - Free Report) made its debut on 01/31/2006, and is a smart beta exchange traded fund that provides broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $1.69 billion, this makes it one of the larger ETFs in the Industrials ETFs. XHB is managed by State Street Global Advisors. Before fees and expenses, XHB seeks to match the performance of the S&P Homebuilders Select Industry Index.
The S&P Homebuilders Select Industry Index represents the homebuilding sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Homebuilders Index is a modified equal weight index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.
XHB's 12-month trailing dividend yield is 0.62%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XHB, it has heaviest allocation in the Consumer Discretionary sector --about 58.50% of the portfolio --while Industrials and Energy round out the top three.
When you look at individual holdings, Lowe's Companies Inc. (LOW - Free Report) accounts for about 4.21% of the fund's total assets, followed by Home Depot Inc. (HD - Free Report) and Builders Firstsource Inc. (BLDR - Free Report) .
XHB's top 10 holdings account for about 39.27% of its total assets under management.
Performance and Risk
The ETF has lost about -16.69% and is up roughly 15.17% so far this year and in the past one year (as of 02/28/2022), respectively. XHB has traded between $60.87 and $86.27 during this last 52-week period.
The ETF has a beta of 1.42 and standard deviation of 32.77% for the trailing three-year period, making it a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Homebuilders ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Invesco Dynamic Building & Construction ETF (PKB - Free Report) tracks Dynamic Building & Construction Intellidex Index and the iShares U.S. Home Construction ETF (ITB - Free Report) tracks Dow Jones U.S. Select Home Construction Index. Invesco Dynamic Building & Construction ETF has $232.16 million in assets, iShares U.S. Home Construction ETF has $2.14 billion. PKB has an expense ratio of 0.60% and ITB charges 0.41%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is SPDR S&P Homebuilders ETF (XHB) a Strong ETF Right Now?
The SPDR S&P Homebuilders ETF (XHB - Free Report) made its debut on 01/31/2006, and is a smart beta exchange traded fund that provides broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $1.69 billion, this makes it one of the larger ETFs in the Industrials ETFs. XHB is managed by State Street Global Advisors. Before fees and expenses, XHB seeks to match the performance of the S&P Homebuilders Select Industry Index.
The S&P Homebuilders Select Industry Index represents the homebuilding sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Homebuilders Index is a modified equal weight index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.
XHB's 12-month trailing dividend yield is 0.62%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XHB, it has heaviest allocation in the Consumer Discretionary sector --about 58.50% of the portfolio --while Industrials and Energy round out the top three.
When you look at individual holdings, Lowe's Companies Inc. (LOW - Free Report) accounts for about 4.21% of the fund's total assets, followed by Home Depot Inc. (HD - Free Report) and Builders Firstsource Inc. (BLDR - Free Report) .
XHB's top 10 holdings account for about 39.27% of its total assets under management.
Performance and Risk
The ETF has lost about -16.69% and is up roughly 15.17% so far this year and in the past one year (as of 02/28/2022), respectively. XHB has traded between $60.87 and $86.27 during this last 52-week period.
The ETF has a beta of 1.42 and standard deviation of 32.77% for the trailing three-year period, making it a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Homebuilders ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Invesco Dynamic Building & Construction ETF (PKB - Free Report) tracks Dynamic Building & Construction Intellidex Index and the iShares U.S. Home Construction ETF (ITB - Free Report) tracks Dow Jones U.S. Select Home Construction Index. Invesco Dynamic Building & Construction ETF has $232.16 million in assets, iShares U.S. Home Construction ETF has $2.14 billion. PKB has an expense ratio of 0.60% and ITB charges 0.41%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.