Making its debut on 01/31/2006, smart beta exchange traded fund SPDR S&P Homebuilders ETF (XHB) provides investors broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by State Street Global Advisors, XHB has amassed assets over $1.47 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.35% for XHB, making it one of the least expensive products in the space.
XHB's 12-month trailing dividend yield is 0.83%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XHB, it has heaviest allocation in the Consumer Discretionary sector --about 65.50% of the portfolio --while Industrials and Energy round out the top three.
When you look at individual holdings, Carlisle Cos Inc (CSL) accounts for about 3.54% of the fund's total assets, followed by Somnigroup International Inc (SGI) and Allegion Plc (ALLE).
XHB's top 10 holdings account for about 34.48% of its total assets under management.
Performance and Risk
So far this year, XHB has lost about -11.48%, and is down about -7.90% in the last one year (as of 04/23/2025). During this past 52-week period, the fund has traded between $86.79 and $125.54.
XHB has a beta of 1.37 and standard deviation of 27.92% 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 $197.15 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
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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SPDR S&P Homebuilders ETF (XHB): ETF Research Reports Carlisle Companies Incorporated (CSL): Free Stock Analysis Report Somnigroup International Inc. (SGI): Free Stock Analysis Report Allegion PLC (ALLE): Free Stock Analysis Report Invesco Building & Construction ETF (PKB): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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