Homebuilder ETFs Buck The Trend As The Housing Market Is Still Uncertain

housing-etfs“While investors’ attention in recent weeks has been on Greece’s debt woes and China’s Treasury buying, among other points of concern, an exchange-traded fund tracking U.S. home-builder stocks has quietly established itself as the best-performing sector fund so far this year. That solid performance doesn’t guarantee future gains and neither has it been smooth sailing,” John Spence Reports From The WSJ.

Spence goes on to say, “Through Friday, the iShares Dow Jones U.S. Home Construction Index Fund (ITB), which invests a majority of its assets in builders, was the top-performing ETF that doesn’t use leverage, with a year-to-date total return of 10.5%, according to investment research firm Morningstar Inc. A choppy rally in home-builder shares has taken place amid fourth-quarter earnings reports. One of the ETF’s largest holdings, Lennar Corp., is up 32% this year, after reporting a surprise fourth-quarter profit after two years of red ink. The SPDR S&P Homebuilders ETF (XHB), which despite its name has a relatively smaller stake in builders, is up 6.5%. With about $760 million in assets, this fund is larger than the $330 million iShares ETF, and is more liquid in terms of share trading volume.”

“Meanwhile, the broader stock market has gone through a rough patch, jitters in credit markets and fears of a double-dip recession, and only recently has edged up again. The SPDR S&P 500 ETF (SPY), which tracks U.S. blue-chip stocks, was off 0.3%. The iShares home-builder ETF leads the second-ranked nonleveraged ETF, SPDR KBW Bank (KBW), by 1.2 points. The future of the U.S. residential housing market is uncertain at best, and the builder ETFs have been extremely volatile in 2010.There are countless sector ETFs that make highly concentrated bets, but the builder ETFs are particularly risky as the housing market fights to recover and the U.S. mortgage-finance market is essentially nationalized,” Spence Reports.

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Here are some details on the iShares Dow Jones U.S. Home Construction Index ETF (ITB) and the SPDR S&P Homebuilders ETF (XHB) including the top holdings in each ETF.

The investment (ITB) seeks investment results that tracks Dow Jones U.S. Select Home Construction index. The fund generally invests at least 90% of assets in securities of the Underlying index and depositary receipts representing securities of the Underlying index. It may invest the remainder of assets in securities not included in the Underlying index but which BGFA believes will help the fund track Underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA. The fund is nondiversified.

TOP 10 HOLDINGS ( 66.65% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Horton (D.R.) Inc. (DHI) 9.16
Home Depot Inc (HD) 4
KB HOME (KBH) 4.5
Lennar Corp. (LEN) 7.15
Lowe’s Companies Inc (LOW) 3.78
M.D.C. Holdings, Inc. (MDC) 4.62
NVR Inc. (NVR) 11.35
Pulte Homes, Inc. (PHM) 9.96
Ryland Group, Inc. (RYL) 4.15
Toll Brothers Inc. (TOL) 7.98

The investment (XHB) seeks to replicate, net of expenses, the S&P Homebuilders Select Industry Index. The fund will invest at least 95% of assets in securities that comprise the index. The index represents the homebuilding sub-industry portion of the S&P TMI.The fund is nondiversified.

TOP 10 HOLDINGS ( 40.45% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Ameron International Corp. (AMN) 4.18
Horton (D.R.) Inc. (DHI) 4.09
Lennar Corp. (LEN) 4
Lennox International Inc (LII) 3.86
M.D.C. Holdings, Inc. (MDC) 4
NVR Inc. (NVR) 4.03
Pulte Homes, Inc. (PHM) 4.2
Ryland Group, Inc. (RYL) 4.04
Simpson Manufacturing Co., Inc. (SSD) 4.13
Toll Brothers Inc. (TOL) 3.92

Chart for iShares Dow Jones US Home Construction (ITB)

 

 

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