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5 Stocks Driving Homebuilding ETF to All-Time Highs

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After being pulled down by surging raw material prices, increasing construction costs and rising mortgage rates in the first half of this year, the housing sector is back on track. This is especially true as iShares U.S. Home Construction ETF (ITB - Free Report) has been hitting record highs lately, having gained 46.8% this year (read: Homebuilding ETF Hits New 52-Week High).

While most of the stocks in the fund’s portfolio delivered strong returns, a few have gained more than 80% so far this year. These include Skyline Corporation (SKY - Free Report) , Louisiana-Pacific Corporation (LPX - Free Report) , Century Communities (CCS - Free Report) , Builders FirstSource (BLDR - Free Report) and Cavco Industries (CVCO - Free Report) .

Though the Fed has turned hawkish, mortgage rates are still near historic lows that are encouraging people to buy more homes, making refinance cheaper. This in turn has led to skyrocketing demand for new homes. U.S. existing home sales in October rise to the highest level in nine months and are on track for the best year since 2006.

Homebuilder confidence is also rising with single-family homes rising more than expected in November, to the highest level since last May. Lack of resale inventory combined with strong consumer demand continues to boost single-family home building. Further, homebuilders are currently well placed, belonging to a top-ranked Zacks industry (placed at the top 27% of 250+ industries), which suggests a solid outlook.

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

ITB in Focus

iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. It holds 46 stocks in its basket with a heavy concentration on the top two firms. Homebuilding and building products take the largest share at 64.8% and 13.5% of assets, respectively, followed by home improvement retail.

iShares U.S. Home Construction ETF has amassed $3 billion in its asset base and trades in a solid volume of around 2.8 million shares a day. It charges investors 41 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High-risk outlook (see: all the Materials ETFs here).

Below we have profiled the five best-performing stocks in the ETF with their respective positions in the fund’s basket:

Best-Performing Stocks of ITB

Skyline Corporation designs, produces and distributes manufactured housing and recreational vehicles. The stock has skyrocketed nearly 171% in the year-to-date timeframe. Skyline has witnessed a solid earnings estimate revision of 64 cents over the past 60 days for the fiscal year (ending Mar 2022) and has an estimated earnings growth rate of 117%.

Skyline currently has a Zacks Rank #1 (Strong Buy) and a Growth Score of A. The stock makes up 1.82% of the total assets in ITB. You can see the complete list of today’s Zacks #1 Rank stocks here.

Louisiana-Pacific is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products as well as exterior siding for use in residential, industrial and light commercial construction. The stock has surged about 100% in the same timeframe. Louisiana-Pacific has seen a solid earnings estimate revision of $1.58 for the next year over the past 60 days.

Louisiana-Pacific has a Zacks Rank #3 (Hold) and a top VGM Score of A. The stock accounts for just 0.88% share in ITB.

Century Communities is a home building and construction company. Its activities comprise land acquisition, development, and entitlements, and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects. The stock makes up for 1% allocation. It has also delivered robust returns of 88.2% so far this year.

Century Communities has seen a positive earnings estimate revision of 44 cents for this year over the past month and has an estimated earnings growth rate of 123%. Century Communities has a Zacks Rank #3 and a VGM Score of A.

Builders FirstSource is the largest supplier of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers. It has seen a solid earnings estimate revision of $1.01 for this year over the past 30 days and has an estimated growth rate of 206.6%.

Builders FirstSource claims 1.96% of the assets in ITB’s portfolio and has jumped more than 87% this year. BLDR has a Zacks Rank #1 and a VGM Score of A (read: 5 ETFs That Survived the Last Week's Rout).

Cavco Industries designs and produces factory-built housing products primarily distributed through a network of independent and Company-owned retailers. The stock has gained 81.5% in the year-to-date timeframe. Cavco Industries has seen a solid earnings estimate revision of $2.01 for the fiscal year (ending Mar 2022) over the past two months and has an expected earnings growth rate of 66.2%.

Cavco Industries sports a Zacks Rank #1 and has a VGM Score of B. The stock makes up for 1.14% share in ITB.