ITB Tops 2012's Best-Performing ETF List
The iShares Dow Jones U.S. Home Construction Index Fund (NYSEArca: ITB) was the best-performing exchange-traded fund in 2012, tallying gains of some 80 percent, in a reflection of an improving U.S. housing market and economy.
The fund has been trading most recently just above $20 a share, its highest price in five years and about three times what it was worth in early 2009, when it traded at all-time lows around $6 a share.
Rising average home prices—up nearly 7 percent this year in the largest year-to-date gain since 2005, plus growing demand for homes and an uptick in housing starts—helped the $1.65 billion fund shoot higher.
What’s more, ITB, which competes with the $2.25 billion SPDR S&P Homebuilders ETF (NYSEArca: XHB)—this year’s third-best-performing ETF with gains of more than 58 percent—also saw sizable net inflows this year, reinforcing that its price action was not merely a reflection of broad equity market gains but also of investor confidence in the sector.
In the past 12 months, investors poured a net of nearly $800 million into ITB as shares of the fund climbed to their highest levels since April 2008, according to data compiled by IndexUniverse. Similarly, XHB pulled in $860 million in the same period.
Housing prices across the U.S. have rallied some 9 percent since they forged a new cycle low earlier this spring, and as of October, were 4.3 percent higher year-on-year, according to recent data on the housing market. Today an average home in the U.S. is still worth about 30 percent less than it was just six years ago, but that’s a significant—and consistent—improvement from values seen just nine months ago.
Sharp gains for ETFs focused on the real estate market are of course noteworthy because housing was at the center of the credit crisis that eventually led the entire U.S. economy into a recession by 2008. Analysts widely believe that stability in housing will be key for the recovery to morph into sustained expansion.
Strength In Underlying Securities
ITB comprises some of the market’s largest homebuilders, including Lennar Corp, PulteGroup, DR Horton and Toll Brothers. All together, home construction companies represent 65 percent of the portfolio, according to data provided by the fund’s sponsor, BlackRock’s iShares.
Some of these names have delivered even more impressive price performances in 2012. Take Lennar Corp., for instance, which is ITB’s single largest holding, representing just over 10 percent of the total portfolio. Its stock price has rallied more than 90 percent year-to-date and, in the past five years, Lennar’s stock price has more than doubled.
Investors are piling into a closed-end fund with a convenient ticker on the way to ruin.
Why currency-hedged Japan ETFs are about to get big cap gains distributions.
The biggest hurdles ETF advisors face aren’t financial, they’re emotional.
Here’s how exchange-traded funds trade and what kind of orders are used.