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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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $938.90 million, making it one of the average sized ETFs in the Industrials ETFs. This particular fund 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.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.35% for XHB, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.91%.
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 54.70% of the portfolio. Industrials and Energy round out the top three.
When you look at individual holdings, Owens Corning (OC - Free Report) accounts for about 4.61% of the fund's total assets, followed by Builders Firstsource Inc. (BLDR - Free Report) and Whirlpool Corporation (WHR - Free Report) .
XHB's top 10 holdings account for about 41.72% of its total assets under management.
Performance and Risk
The ETF has lost about -32.40% so far this year and is down about -22.83% in the last one year (as of 07/05/2022). In the past 52-week period, it has traded between $52.03 and $86.27.
The fund has a beta of 1.34 and standard deviation of 34.94% for the trailing three-year period, which makes XHB a high risk choice in this particular 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 $118.78 million in assets, iShares U.S. Home Construction ETF has $1.33 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.
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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $938.90 million, making it one of the average sized ETFs in the Industrials ETFs. This particular fund 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.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.35% for XHB, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.91%.
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 54.70% of the portfolio. Industrials and Energy round out the top three.
When you look at individual holdings, Owens Corning (OC - Free Report) accounts for about 4.61% of the fund's total assets, followed by Builders Firstsource Inc. (BLDR - Free Report) and Whirlpool Corporation (WHR - Free Report) .
XHB's top 10 holdings account for about 41.72% of its total assets under management.
Performance and Risk
The ETF has lost about -32.40% so far this year and is down about -22.83% in the last one year (as of 07/05/2022). In the past 52-week period, it has traded between $52.03 and $86.27.
The fund has a beta of 1.34 and standard deviation of 34.94% for the trailing three-year period, which makes XHB a high risk choice in this particular 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 $118.78 million in assets, iShares U.S. Home Construction ETF has $1.33 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.
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.