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Is SPDR S&P Homebuilders ETF (XHB) a Strong ETF Right Now?
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Designed to provide broad exposure to the Industrials ETFs category of the market, the SPDR S&P Homebuilders ETF (XHB - Free Report) is a smart beta exchange traded fund launched on 01/31/2006.
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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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
Because the fund has amassed over $946.09 million, this makes it one of the average sized ETFs in the Industrials ETFs. XHB is managed by State Street Global Advisors. 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
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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
XHB's 12-month trailing dividend yield is 0.97%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 57.30% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Energy round out the top three.
Looking at individual holdings, D.r. Horton Inc. (DHI - Free Report) accounts for about 4.78% of total assets, followed by Johnson Controls International Plc (JCI - Free Report) and Lennar Corporation Class A (LEN - Free Report) .
The top 10 holdings account for about 43.88% of total assets under management.
Performance and Risk
The ETF has added roughly 9.68% and is down about -17.42% so far this year and in the past one year (as of 01/13/2023), respectively. XHB has traded between $52.03 and $78.88 during this last 52-week period.
The ETF has a beta of 1.30 and standard deviation of 37.09% 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.
Alternatives
SPDR S&P Homebuilders ETF is not a suitable option for investors seeking to outperform the Industrials ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $110.64 million in assets, iShares U.S. Home Construction ETF has $1.51 billion. PKB has an expense ratio of 0.57% and ITB charges 0.39%.
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?
Designed to provide broad exposure to the Industrials ETFs category of the market, the SPDR S&P Homebuilders ETF (XHB - Free Report) is a smart beta exchange traded fund launched on 01/31/2006.
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.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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
Because the fund has amassed over $946.09 million, this makes it one of the average sized ETFs in the Industrials ETFs. XHB is managed by State Street Global Advisors. 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
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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
XHB's 12-month trailing dividend yield is 0.97%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 57.30% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Energy round out the top three.
Looking at individual holdings, D.r. Horton Inc. (DHI - Free Report) accounts for about 4.78% of total assets, followed by Johnson Controls International Plc (JCI - Free Report) and Lennar Corporation Class A (LEN - Free Report) .
The top 10 holdings account for about 43.88% of total assets under management.
Performance and Risk
The ETF has added roughly 9.68% and is down about -17.42% so far this year and in the past one year (as of 01/13/2023), respectively. XHB has traded between $52.03 and $78.88 during this last 52-week period.
The ETF has a beta of 1.30 and standard deviation of 37.09% 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.
Alternatives
SPDR S&P Homebuilders ETF is not a suitable option for investors seeking to outperform the Industrials ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $110.64 million in assets, iShares U.S. Home Construction ETF has $1.51 billion. PKB has an expense ratio of 0.57% and ITB charges 0.39%.
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.