Homebuilders stocks and the corresponding exchange traded funds have come under some pressure lately as lethargic data prompts investors to depart consumer-related sector and industry funds.
Investors pulled a record amount of cash from SPDR S&P Homebuilders ETF (NYSEArca: XHB) after the ETF hit an eight-year high in February, Bloomberg reports.
XHB experienced $376.3 million in outflows over April, according to ETF.com. Moreover, short sellers in XHB have increased their bearish bets to the highest level in over six months. [Investors Part With Homebuilders ETFs]
XHB is down 2.6% over the past month, not a jaw-dropping decline, particularly after the ETF hit a multi-year high just a few months ago. Still, a case can be made that XHB is being victimized by a throwing the baby out with the bathwater type of trade and that those with a longer-term view will be rewarded by the ETF.
“The recent string of recent positive economic data, combined with seasonal trends, point towards an attractive backdrop for the U.S. housing market,” said State Street Head of Research Dave Mazza in an email exchange with ETF Trends. “Household spending, the largest part of the economy, advanced 1.9% in Q1 after expanding in the previous quarter at the fastest pace since 2006.”
As it pertains to XHB, the point about household spending is important because the ETF is not a pure homebuilders fund. The $1.55 billion XHB allocates less than a third of its weight to pure homebuilders stocks. Almost a third of XHB’s weight is devoted to home furnishings and improvement retailers, giving the ETF a distinct consumer discretionary feel. [Homebuilders ETFs Rally]