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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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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 $1.39 billion, making it one of the larger ETFs in the Industrials ETFs. Before fees and expenses, this particular fund 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things 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.
It's 12-month trailing dividend yield comes in at 0.85%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 53.70% of the portfolio. Industrials and Energy round out the top three.
Looking at individual holdings, Floor & Decor Holdings Inc. Class A (FND - Free Report) accounts for about 4.53% of total assets, followed by Pultegroup Inc. (PHM - Free Report) and Builders Firstsource Inc. (BLDR - Free Report) .
XHB's top 10 holdings account for about 42.06% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Homebuilders ETF has added about 37.53% so far, and is up about 37.24% over the last 12 months (as of 07/21/2023). XHB has traded between $53.40 and $84.36 in this past 52-week period.
XHB has a beta of 1.35 and standard deviation of 27.71% 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.
Alternatives
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 - 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 $242.60 million in assets, iShares U.S. Home Construction ETF has $2.43 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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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 $1.39 billion, making it one of the larger ETFs in the Industrials ETFs. Before fees and expenses, this particular fund 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things 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.
It's 12-month trailing dividend yield comes in at 0.85%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 53.70% of the portfolio. Industrials and Energy round out the top three.
Looking at individual holdings, Floor & Decor Holdings Inc. Class A (FND - Free Report) accounts for about 4.53% of total assets, followed by Pultegroup Inc. (PHM - Free Report) and Builders Firstsource Inc. (BLDR - Free Report) .
XHB's top 10 holdings account for about 42.06% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Homebuilders ETF has added about 37.53% so far, and is up about 37.24% over the last 12 months (as of 07/21/2023). XHB has traded between $53.40 and $84.36 in this past 52-week period.
XHB has a beta of 1.35 and standard deviation of 27.71% 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.
Alternatives
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 - 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 $242.60 million in assets, iShares U.S. Home Construction ETF has $2.43 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.