Should You Invest in the SPDR S&P Homebuilders ETF (XHB)?

Looking for broad exposure to the Industrials - Engineering and Construction segment of the equity market? You should consider the SPDR S&P Homebuilders ETF (XHB), a passively managed exchange traded fund launched on 01/31/2006.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Engineering and Construction is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.41 billion, making it one of the larger ETFs attempting to match the performance of the Industrials - Engineering and Construction segment of the equity market. XHB 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.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.83%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Discretionary sector--about 61% of the portfolio, followed by Industrials.

Looking at individual holdings, Johnson Controls Internation (JCI) accounts for about 3.73% of total assets, followed by Williams Sonoma Inc (WSM) and Smith (a.o.) Corp (AOS).

The top 10 holdings account for about 35.56% of total assets under management.

Performance and Risk

The ETF has lost about -11.84% so far this year and is down about -11.19% in the last one year (as of 04/15/2025). In that past 52-week period, it has traded between $86.79 and $125.54.

The ETF has a beta of 1.37 and standard deviation of 27.91% for the trailing three-year period, making it a high risk choice in the space. With about 38 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Homebuilders ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. XHB, then, is not the best option for investors seeking exposure to the Industrials ETFs segment of the market. Instead, there are better ETFs in the space to consider.

Invesco Building & Construction ETF (PKB) tracks Dynamic Building & Construction Intellidex Index. The fund has $210.65 million in assets. PKB has an expense ratio of 0.57%.

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

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