Making its debut on 01/31/2006, smart beta exchange traded fund SPDR S&P Homebuilders ETF (
XHB Quick Quote XHB - Free Report) provides investors broad exposure to the Industrials ETFs category of the market. What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.20 billion, making it one of the average sized ETFs in the Industrials ETFs. 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 XHB, making it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.75%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 54.60% of the portfolio. Industrials and Energy round out the top three.
Looking at individual holdings, Owens Corning (
OC Quick Quote OC - Free Report) accounts for about 4.61% of total assets, followed by Builders Firstsource Inc. ( BLDR Quick Quote BLDR - Free Report) and Whirlpool Corporation ( WHR Quick Quote WHR - Free Report) .
The top 10 holdings account for about 41.72% of total assets under management.
Performance and Risk
The ETF has lost about -24.47% so far this year and is down about -17.14% in the last one year (as of 05/04/2022). In the past 52-week period, it has traded between $60.90 and $86.27.
XHB has a beta of 1.33 and standard deviation of 33.80% 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.
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 Quick Quote PKB - Free Report) tracks Dynamic Building & Construction Intellidex Index and the iShares U.S. Home Construction ETF ( ITB Quick Quote ITB - Free Report) tracks Dow Jones U.S. Select Home Construction Index. Invesco Dynamic Building & Construction ETF has $152.08 million in assets, iShares U.S. Home Construction ETF has $1.48 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.
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.