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Is SPDR S&P Homebuilders ETF (XHB) a Strong ETF Right Now?
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Launched on 01/31/2006, the SPDR S&P Homebuilders ETF (XHB - Free Report) is a smart beta exchange traded fund offering broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XHB has been able to amass assets over $984.23 million, making it one of the average sized ETFs in the Industrials ETFs. This particular fund, before fees and expenses, 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 XHB, making it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.88%.
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.
Representing 54.70% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Energy round out the top three.
Taking into account individual holdings, Floor & Decor Holdings Inc. Class A (FND - Free Report) accounts for about 3.89% of the fund's total assets, followed by Trane Technologies Plc (TT - Free Report) and Lennox International Inc. (LII - Free Report) .
Its top 10 holdings account for approximately 38.11% of XHB's total assets under management.
Performance and Risk
The ETF has lost about -29.77% so far this year and is down about -24.32% in the last one year (as of 09/07/2022). In the past 52-week period, it has traded between $52.03 and $86.27.
XHB has a beta of 1.37 and standard deviation of 35.26% for the trailing three-year period, which makes the fund 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 a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
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 $115.63 million in assets, iShares U.S. Home Construction ETF has $1.27 billion. PKB has an expense ratio of 0.60% and ITB charges 0.39%.
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?
Launched on 01/31/2006, the SPDR S&P Homebuilders ETF (XHB - Free Report) is a smart beta exchange traded fund offering broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XHB has been able to amass assets over $984.23 million, making it one of the average sized ETFs in the Industrials ETFs. This particular fund, before fees and expenses, 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 XHB, making it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.88%.
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.
Representing 54.70% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Energy round out the top three.
Taking into account individual holdings, Floor & Decor Holdings Inc. Class A (FND - Free Report) accounts for about 3.89% of the fund's total assets, followed by Trane Technologies Plc (TT - Free Report) and Lennox International Inc. (LII - Free Report) .
Its top 10 holdings account for approximately 38.11% of XHB's total assets under management.
Performance and Risk
The ETF has lost about -29.77% so far this year and is down about -24.32% in the last one year (as of 09/07/2022). In the past 52-week period, it has traded between $52.03 and $86.27.
XHB has a beta of 1.37 and standard deviation of 35.26% for the trailing three-year period, which makes the fund 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 a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
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 $115.63 million in assets, iShares U.S. Home Construction ETF has $1.27 billion. PKB has an expense ratio of 0.60% and ITB charges 0.39%.
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.