Making its debut on 01/31/2006, smart beta exchange traded fund State Street SPDR S&P Homebuilders ETF (XHB) provides investors broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by State Street Investment Management, XHB has amassed assets over $1.95 billion, making it one of the larger ETFs in the Industrials ETFs. Before fees and expenses, XHB seeks to match the performance of the S&P Homebuilders Select Industry Index.
The S&P Homebuilders Select Industry Index represents the homebuilding sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Homebuilders Index is a modified equal weight index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 0.67%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 60.4% of the portfolio. Industrials and Energy round out the top three.
Looking at individual holdings, Modine Manufacturing Co (MOD) accounts for about 3.95% of total assets, followed by Owens Corning (OC) and Trane Technologies Plc (TT).
Its top 10 holdings account for approximately 34.84% of XHB's total assets under management.
Performance and Risk
So far this year, XHB return is roughly 3.36%, and is up roughly 4.85% in the last one year (as of 07/09/2026). During this past 52-week period, the fund has traded between $94.86 and $121.36.
The ETF has a beta of 1.24 and standard deviation of 26.55% for the trailing three-year period, making it a high risk choice in the space. With about 37 holdings, it has more concentrated exposure than peers .
Alternatives
State Street SPDR S&P Homebuilders ETF is not a suitable option for investors seeking to outperform the Industrials ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Invesco Building & Construction ETF(PKB) tracks Dynamic Building & Construction Intellidex Index The fund has $433.5 million in assets. PKB has an expense ratio of 0.57%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs
Bottom Line
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State Street SPDR S&P Homebuilders ETF (XHB): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).