ETF Chart of the Day: Helpful Homebuilders

The Homebuilders and Construction segment has been out-performing the broad market notably in the early days of January here, and we see continued optimism in the marketplace via XHB (SPDR S&P Homebuilders, Expense Ratio 0.35%) upside calls.

The March 35 strikes traded in decent size yesterday (XHB currently has a $34 handle) and is trading once again at multi-year highs this morning, and looking to finish above its $34.47 intraday high just six trading sessions ago (before it reverted lower in the short term with the rest of the market).

Trading volume yesterday in XHB was gigantic, with nearly 10 million shares trading versus its average daily volume of about 3.9 million shares. XHB despite its tenure, having launched back in 2006, is no longer the largest “Homebuilders and Construction” ETF in the U.S. listed marketplace, as it has been overtaken by ITB (iShares U.S. Home Construction, Expense Ratio 0.46%) which has approximately $1.5 billion in assets under management versus XHB’s $1.41 million.

It seems to be a hotly contested battle for supremacy in the Homebuilders and Construction space between these two funds actually, as they both trade north of 3.5 million shares daily as well, with XHB having a slight
edge with about 3.9 million shares changing hands daily.

PKB (PowerShares Dynamic Building & Construction Portfolio, Expense Ratio 0.63%) is substantially smaller than the two aforementioned funds with only $51 million in AUM and unlike both XHB and ITB, has not seen a
notable uptick in trading interest lately. Levered Homebuilders and Construction ETFs have been tried in the past by ETF issuers, but have failed to take hold and subsequently been de-listed, so we cannot offer any insight on such strategies that are not currently available.

Finally, some nuances that we have pointed out before that should be re-visited is the fact that XHB and ITB track two very different indexes, thus giving the funds very different single name exposures. XHB also incorporates a modified equal-weighted index approach unlike the market cap weighted ITB, and top positions in XHB currently are LL (>3.3%), AAN (>3.3%), TOL (>3.2%), OC (>3.2%), and TPH (>3.2%).