The equal-weight XHB mixes stocks such as Tempur Sealy (NYSE: TPX), Williams-Sonoma (NYSE: WSM) and Restoration Hardware (NYSE: RH) with pure play homebuilders such as Lennar (NYSE: LEN) and Toll Brothers (NYSE: TOLL) among others. Conversely, ITB is more of direct play on dedicated hombeuilders stocks.
Erin Gibbs, equity chief investment officer at S&P Global, said Tuesday on CNBC’s “Power Lunch” that “homebuilders “one of the better industry bets,” saying they are expected to see 15 percent earnings growth for next year, beating out that of the S&P 500’s 12.3 percent. She also said their forward price-to-earnings ratio is 10.5, versus 18 times for the overall S&P 500,” reports CNBC.
Some investors believe Trump will follow through on campaign promises to reduce corporate taxes, cut back on regulations and throw billions of dollars into the U.S. economy. However, the expansionary rhetoric has caused the Federal Reserve to tighten its monetary policy, which could push up mortgage rates.
“From a technical perspective, homebuilder names look poised for gains, according to Chris Verrone, head of technical analysis at Strategas Research Partners,” according to CNBC.
Traders looking for a bearish play on homebuilders stocks can consider the Direxion Daily Homebuilders & Supplies 3x Bear Shares (NYSEArca: CLAW), which attempts to deliver triple the daily performance of the index XHB tracks.
For more information on the housing sector, visit our homebuilders category.