The rising home furnishing sales suggest that the housing market and homebuilders sector-related exchange traded funds are building up.
Warren Buffett, chief executive officer of Berkshire Hathaway Inc., sees that a rebound in the residential real estate market could sustain growth in the U.S. economy, Bloomberg reports.
“Housing is picking up, our furniture stores are running at good gains,” as is the carpet business, Buffett said at Fortune’s Most Powerful Women Summit. “Brick has picked up somewhat, but it’s still slow.”
The pick up in home furnishing suggests that the housing market is strengthening. Investors can also capitalize on the trend through homebuilder-related ETFs.
Along with exposure to home construction companies, the SPDR S&P Homebuilders ETF (NYSEArca: XHB), iShares U.S. Home Construction ETF (NYSEArca: ITB) and PowerShares Dynamic Building & Construction Portfolio (NYSEArca: PKB) also include allocations toward home improvement, furnishing and appliances retailers.
For instance, XHB has the largest tilt to consumer/home related companies. The ETF tracks an equally weighted index that includes 34.5% homebuilding, 28.2% building products, 13.2% home furnishing retail, 9.8%, home furnishing, household appliances 7.1% and home improvement retail 7.0%. As a result, XHB holds companies like retailers Home Depot (NYSE: HD) 3.5% and Restoration Hardware (NYSE: RH) 3.2, along with floor-covering company Mohawk Industries (NYSE: MHK) 3.2%, bedding manufacturer Tempur Sealy (NYSE: TPX) 3.3% and household appliance maker Helen of Troy (NasdaqGS: HELE) 3.9%.
ITB has the largest tilt toward homebuilders, including 64.7% homebuilding, 14.8% building products, 9.0% home improvement retail, 4.3% home furnishings, 2.4% trading companies & distributors, 2.2% specialty chemicals, 1.2% forest products and 1.2% construction materials. The largest non-homebuilding holdings are home-improvement retailers HD 4.7% and Lowe’s (NYSE: LOW) 3.6%, along with building-materials manufacturers Sherwin-Williams (NYSE: SHW) 2.2% and MHK 2.0%.
PKB holds 43.0% in industrial names, along with 31.0% in consumer discretionary retailers and 26.1% in materials companies. Non-homebuilding components include LOW 5.3%, HD 5.1%, DR Horton (NYSE: DHI) 5.1%, Tractor Supply (NasdaqGS: TSCO) 5.0%, MHK 5.0%, NVR Inc (NYSE: NVR) 2.9% and Installed Building Products (NYSE: IBP) 2.6%.
For more information on the housing market, visit our homebuilders category.
Full disclosure: Tom Lydon’s clients own shares of ITB.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.