The SPDR S&P Homebuilders ETF (XHB) made its debut on 01/31/2006, and is a smart beta exchange traded fund that provides broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
Managed by State Street Global Advisors, XHB has amassed assets over $1.2 billion, making it one of the average sized ETFs in the Industrials ETFs. 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.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 0.94%.
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.
For XHB, it has heaviest allocation in the Consumer Discretionary sector --about 63.8% of the portfolio --while Industrials and Energy round out the top three.
Looking at individual holdings, Johnson Controls Internation (JCI) accounts for about 4.45% of total assets, followed by Trane Technologies Plc (TT) and Somnigroup International Inc (SGI).
Its top 10 holdings account for approximately 37.82% of XHB's total assets under management.
Performance and Risk
So far this year, XHB has lost about -6.35%, and is down about -4.45% in the last one year (as of 06/24/2025). During this past 52-week period, the fund has traded between $86.79 and $125.54.
The fund has a beta of 1.28 and standard deviation of 26.80% for the trailing three-year period, which makes XHB a high risk choice in this particular 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 $220.16 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 ReportsThis article originally published on Zacks Investment Research (zacks.com).
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