The Two Biggest Homebuilder ETFs Are Quite A Bit Different Under The Hood
Homebuilders and Construction based stocks have prospered since Trump’s election last November, even amid an environment of rising interest rates.
The largest ETP in the space, ITB (iShares U.S. Home Construction, Expense Ratio 0.43%, $1.129 billion in AUM) currently holds a very narrow edge over the next biggest product in the space, XHB (SPDR Homebuilders, Expense Ratio 0.35%, $1.127 billion in AUM).
ITB has raised about $51 million year-to-date thanks to inflows, while XHB has actually seen net outflows to the tune of about $123 million. After just trading at 52-week highs, both ETFs have regressed a bit to current levels.
As we have mentioned in the past when covering these funds as important nuances, ITB hones in on Homebuilder and Construction stocks solely, and has forty-five individual holdings within the fund presently. Top weightings are as follows: 1) DHI (12.64%), 2) LEN (10.98%), 3) NVR (8.37%), 4) PHM (8.18%), and 5) TOL (6.03%).
XHB meanwhile, even though it nearly has identical asset levels as ITB presently, has a much different look and feel in terms of its actual underlying portfolio — not to mention it follows a modified equal-weighting strategy, as opposed to ITB’s market capitalization weighted structure.
XHB owns thirty-six individual equity names presently, but is not confined to just Homebuilders or those companies involved in Home Construction. One can see this by examining the holdings of this fund, specifically the top weightings: 1) PHM (5.06%), 2) MHK (4.98%), 3) DHI (4.78%), 4) HD (4.75%), 5) MAS (4.66%), 6) WHR (4.64%), 7) JCI (4.64%), 8) LEN (4.59%), 9) LOW (4.51%), and 10) FBHS (4.51%).
Notably, only three of the top ten holdings of XHB are actual Homebuilders, while the rest of the top weightings are involved in industries that benefit from strong home demand such as home furnishings and DYI materials, in the case of FBHS, HD, and LOW for example. MHK of course manufactures carpets and rugs, MAS is a building supply and construction materials outfit, and WHR produces a number of home appliances not limited to washers, dryers, and refrigerators.
While ITB and XHB are the clear giants in this niche in terms of AUM size, several other funds to watch in the space, some of them Bull and Bear levered, include: PKB (PowerShares Dynamic Building & Construction Portfolio, Expense Ratio 0.63%), HOML (ETRACS Monthly Reset 2X Leveraged ISE Exclusively Homebuilders ETN, Expense Ratio 0.85%), CLAW (Direxion Daily Homebuilders & Supplies Bear 3X ETF, Expense Ratio 0.95%), and NAIL (Direxion Daily Homebuilders & Supplies Bull 3X ETF, Expense Ratio 0.95%).
The iShares Dow Jones US Home Const. ETF (NYSE:ITB) was trading at $29.85 per share on Thursday afternoon, down $0.18 (-0.60%). Year-to-date, ITB has gained 8.62%, versus a 5.74% rise in the benchmark S&P 500 index during the same period.
ITB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #7 of 33 ETFs in the Industrials Equities ETFs category.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.
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