Is SPDR S&P Homebuilders ETF (XHB) a Strong ETF Right Now?

A smart beta exchange traded fund, the SPDR S&P Homebuilders ETF (XHB) debuted on 01/31/2006, and offers broad exposure to the Industrials ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

XHB is managed by State Street Investment Management, and this fund has amassed over $1.71 billion, which makes it one of the larger 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for XHB are 0.35%, which makes it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 0.74%.

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 67% of the portfolio. Industrials and Energy round out the top three.

Looking at individual holdings, Allegion Plc (ALLE) accounts for about 3.73% of total assets, followed by Topbuild Corp (BLD) and Trane Technologies Plc (TT).

Its top 10 holdings account for approximately 35.44% of XHB's total assets under management.

Performance and Risk

So far this year, XHB has added about 4.73%, and is down about -7.23% in the last one year (as of 10/27/2025). During this past 52-week period, the fund has traded between $86.79 and $125.16.

XHB has a beta of 1.29 and standard deviation of 26.07% 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 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 Building & Construction ETF(PKB) tracks Dynamic Building & Construction Intellidex Index The fund has $307.49 million in assets. PKB has an expense ratio of 0.57%.

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

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This article originally published on Zacks Investment Research (zacks.com).

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