Designed to provide broad exposure to the Industrials - Engineering and Construction segment of the equity market, the SPDR S&P Homebuilders ETF (
XHB Quick Quote XHB - Free Report) is a passively managed exchange traded fund launched on 01/31/2006.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Engineering and Construction is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.25 billion, making it one of the larger ETFs attempting to match the performance of the Industrials - Engineering and Construction segment of the equity market. XHB seeks to match the performance of the S&P Homebuilders Select Industry Index before fees and expenses.
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.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.77%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector--about 55.40% of the portfolio, followed by Industrials.
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 -26.85% and is down about -20.84% so far this year and in the past one year (as of 05/09/2022), respectively. XHB has traded between $60.90 and $86.27 during this last 52-week period.
The ETF has a beta of 1.33 and standard deviation of 33.93% 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.
SPDR S&P Homebuilders ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XHB is an excellent option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that 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 $149.09 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%. Bottom Line
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Zacks ETF Center.