The State Street SPDR S&P Homebuilders ETF (XHB) was launched on 01/31/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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
XHB is managed by State Street Investment Management, and this fund has amassed over $1.42 billion, which makes it one of the larger ETFs in the Industrials ETFs. This particular fund, before fees and expenses, 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.
Annual operating expenses for XHB are 0.35%, which makes it one of the least expensive products in the space.
XHB's 12-month trailing dividend yield is 0.69%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 59% of the portfolio. Industrials and Energy round out the top three.
Taking into account individual holdings, Owens Corning (OC) accounts for about 4.56% of the fund's total assets, followed by Allegion Plc (ALLE) and Installed Building Products (IBP).
XHB's top 10 holdings account for about 39.65% of its total assets under management.
Performance and Risk
The ETF has added about 0.65% and is down about -12.9% so far this year and in the past one year (as of 09/08/2026), respectively. XHB has traded between $94.86 and $121.36 during this last 52-week period.
The ETF has a beta of 1.25 and standard deviation of 26.77% for the trailing three-year period, making it a high risk choice in the space. With about 35 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 $337.44 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).