Weighting Methodology, Expenses Make XHB Clear Winner Among Homebuilder ETFs
Tuesday, March 16th, 2010ETF Database submits:
Homebuilders were among the hardest hit sectors during the recent recession, as steep declines in demand for new properties brought this once-booming industry to a standstill. However, the combination of legislative initiatives (such as the home buyer tax credit) and record low interest rates have breathed life into a sector that was recently left for dead. This optimism is visible in the performance of two homebuilder ETFs that are currently available to U.S. investors; the SPDR Homebuilders ETF (XHB) and iShares Dow Jones U.S. Home Construction Index Fund (ITB). Both of these funds have gained at least 10% so far this year, outpacing broad markets by a wide margin. While these two funds are similar in many ways, they are far from identical; below, we take a look at how XHB and ITB stack up side-by-side.
Indexes
XHB tracks the S&P Homebuilders Select Industry Index, a benchmark that represents the homebuilding sub-industry portion of the S&P Total Markets Index. The index tracks all the U.S. listed common stocks through an equal weighted market cap methodology. ITB follows the Dow Jones U.S. Select Home Construction Index, which tracks the performance of companies that are based in the U.S. and focus on the homebuilding segment of the market. The fund tracks companies that are constructors of residential homes, including manufactured and prefabricated units.
