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Should You Invest in the iShares U.S. Home Construction ETF (ITB)?

Sector ETF report for ITB

By
This story originally appeared on Zacks

If you're interested in broad exposure to the Industrials - Engineering and Construction segment of the equity market, look no further than the iShares U.S. Home Construction ETF (ITB), a passively managed exchange traded fund launched on 05/01/2006.

- Zacks

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Engineering and Construction is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $3.10 billion, making it one of the largest ETFs attempting to match the performance of the Industrials - Engineering and Construction segment of the equity market. ITB seeks to match the performance of the Dow Jones U.S. Select Home Construction Index before fees and expenses.

The Dow Jones U.S. Select Home Builders Index is a subset of the Dow Jones U.S. Household Goods Index. It is a free-float adjusted market capitalization-weighted index. It measures the performance of the home construction sector of the U.S. equity market.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.41%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.38%.

Sector Exposure and Top Holdings

ETFs offer a 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 78.10% of the portfolio. Industrials and Materials round out the top three.

Looking at individual holdings, D R Horton Inc (DHI) accounts for about 13.59% of total assets, followed by Lennar A Corp (LEN) and Nvr Inc (NVR).

The top 10 holdings account for about 63.76% of total assets under management.

Performance and Risk

So far this year, ITB has added roughly 46.73%, and it's up approximately 38.93% in the last one year (as of 12/23/2021). During this past 52-week period, the fund has traded between $54.60 and $83.04.

The ETF has a beta of 1.42 and standard deviation of 36.65% for the trailing three-year period, making it a high risk choice in the space. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Home Construction ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, ITB is an outstanding option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Invesco Dynamic Building & Construction ETF (PKB) tracks Dynamic Building & Construction Intellidex Index and the SPDR S&P Homebuilders ETF (XHB) tracks S&P Homebuilders Select Industry Index. Invesco Dynamic Building & Construction ETF has $291.90 million in assets, SPDR S&P Homebuilders ETF has $2.08 billion. PKB has an expense ratio of 0.60% and XHB charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.



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iShares U.S. Home Construction ETF (ITB): ETF Research Reports

 

Lennar Corporation (LEN): Free Stock Analysis Report

 

D.R. Horton, Inc. (DHI): Free Stock Analysis Report

 

NVR, Inc. (NVR): Free Stock Analysis Report

 

SPDR S&P Homebuilders ETF (XHB): ETF Research Reports

 

Invesco Dynamic Building & Construction ETF (PKB): ETF Research Reports

 

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