Gap Between Homebuilder ETFs Widens

August 18, 2017

Homebuilders Fueling Gains

And that’s the crux of the performance divergence because this year it’s the homebuilder names that are having a stellar run, while “related industries have had mixed results.”

“XHB missed out on much of that rally,” Burley notes.  

ITB, which market-cap-weights 44 holdings led by names DR Horton, Lennar, NVR and PulteGroup, has some $1.5 billion in total assets. XHB, with 35 equally weighted holdings, has roughly $1 billion in assets. 

The difference in portfolio holdings and weighting schemes is the source of a perennial gap in performance, but that doesn’t mean ITB always has the upper hand. Sometimes the allocation and weighting differences benefit ITB, other times they benefit XHB—in 2013, for example, XHB led by 8 percentage points.  

2012 Was A Good Year

The gap in returns between ITB and XHB hasn’t been as wide as this year since 2012, when ITB shelled out 22 percentage points more than XHB in a year when both funds rallied, and ITB went on to gain nearly 80% in 12 months.

In the past five years, however, buying into the U.S. housing recovery story through either of these popular ETFs hasn’t been a bad idea. The funds have significantly outperformed SPY.   

 

Charts courtesy of StockCharts.com

Contact Cinthia Murphy at [email protected]

 

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