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5 Best-Performing Stocks of the Top ETF of March

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iShares U.S. Home Construction ETF (ITB - Free Report) topped the list of the best-performing ETFs in March with impressive returns of about 14%.

Robust demand for homes continued to buoy homebuilders. New home sales increased 8.2% year over year in February and existing homes sales were also up 9.1%, suggesting robust times for the homebuilding industry. Though the sustained rise in mortgage rate is making home ownership more expensive for first-time buyers, the rate is still below the year-ago level of 3.65%. The rates are likely to remain low at least this year on the Fed’s easy money policy (read: Can Housing ETFs Remain Red-Hot in 2021?).

Additionally, the still stay-at-home culture due to the pandemic has resulted in high demand for big homes, as buyers now want specific spaces for working, schooling and exercising. The post-pandemic world has led to a demographic shift, with millennials being the largest emerging homebuyers.

However, surging raw material prices of lumber and wood, and increasing construction costs are restricting supply. Lumber has never been more expensive and is currently more than twice the price for this time of the year. According to the National Association of Home Builders, lumber costs have spiked 180% since last April, increasing the cost of building an average single-family home by $24,000.

Crude oil, a starting point for paint, drain pipe, roof shingles and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in autumn. Prices for granite, insulation, concrete blocks and common brick have all hit new records in 2021. According to the Bureau of Labor Statistic’s producer-price index, drywall and ceramic tiles also climbed but are well below the record prices (read: What's in Store for Housing ETFs as US New Home Sales Fall?).

Let’s take a closer look at the fundamentals of ITB.

ITB in Focus

This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2.6 billion, it holds a basket of 46 stocks with a heavy concentration on the top two firms. The product charges 42 basis points (bps) in annual fees and trades in heavy volume of around 3 million shares a day on average. It has a Zacks Rank #3 (Hold) with a High risk outlook.

Though most of the stocks in the fund’s portfolio delivered strong returns, a few have gained in double-digits last month. Below we have highlighted the five best-performing stocks in the ETF with their respective positions in the fund’s basket:

Best-Performing Stocks of ITB

LGI Homes Inc. (LGIH - Free Report) : This Texas-based company is engaged in the design and construction of entry-level homes across Texas, Arizona, Florida and Georgia. The stock makes up for 1.6% allocation in the fund’s basket and has gained about 26% in a month. It has a Zacks Rank #2 (Buy) and a VGM Score of B.

UFP Industries Inc. (UFPI - Free Report) : This Michigan-based company supplies wood, wood composite and other products in retail, industrial and construction market. It has gained nearly 22% in a month and makes up for 0.7% share in the fund’s basket. The stock has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lennar Corporation (LEN - Free Report) : This Florida-based company is engaged in homebuilding and financial services in the United States. It occupies the second position in ITB with 13.4% of assets. Lennar has delivered incredible returns of about 20% in a month. The stock has a Zacks Rank #1 and a VGM Score of A (read: Homebuilding ETFs Standing Tall Amid Rising Costs).

The Home Depot Inc. (HD - Free Report) : This Georgia-based company offers a diverse range of branded and proprietary home improvement items, building materials, lawn and garden products, décor products and related services. The stock takes the fifth spot in the fund’s basket with 4.9% of the assets. It has gained 17.3% in a month. Home Depot has a Zacks Rank #3 and a Growth Score of B.

Lowes Companies Inc. (LOW - Free Report) : This North Carolina-based company is one of the world’s leading home improvement retailers, offering services to homeowners, renters and commercial business customers. The stock is up 16.6% in a month and takes the sixth spot in ITB accounting for 4.8% of the total assets. Lowes has a Zacks Rank #3 and a VGM Score of B.

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