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5 Ways To Play The XHB
The past three years haven't been easy for homebuilders and the ancillary companies that make up the SPDR S&P Homebuilders ETF (NYSE:XHB). The exchange-traded fund is down 46% over the last year and down 1.5% year-to-date, as of the close of market on April 9. At some point, the housing situation will improve. And when it does, plenty of opportunities will await investors. For now, investors learn five ways to play the eventual rebound.
IN PICTURES: 10 Biggest Losers In Finance
The ETF In A Nutshell
The SPDR S&P Homebuilders ETF trades on the New York Stock Exchange. It closely matches the returns and holdings of the S&P Homebuilders Select Industry Index. With 22 holdings, $612.56 million in assets and a dividend yield of 2.12%, the
ETF is probably the best way to play the homebuilding industry. In it, investors gain a diversified portfolio of mostly large cap stocks. Down as much as it is makes it a good time to buy, although dollar-cost averaging is a smart play as well. (To learn more about exchange-traded funds, check out Singling Out Sector ETFs.)
A Marriage Of Equals
On April 8, Pulte Homes (NYSE:PHM) announced its acquisition of competitor Centex (NYSE:CTX) for $1.3 billion in stocks. The merged company will be the largest homebuilder in the country, combining Pulte's focus on retirement communities with Centex's focus on first-time homebuyers. Pulte shareholders will own 68% of the new company with Centex shareholders owning the rest. The deal marks the beginning of what should lead to further consolidation in the homebuilding industry. February new home sales were up 5% from January, a sign the real estate industry might have hit bottom.
Cheer Up The House
With housing prices cratering, Americans who once considered moving are now making do with the same old house. As a result, one of the fastest and cheapest ways to brighten up a home is to paint it. And that's where Sherwin-Williams (NYSE:SHW) comes in.The largest paint seller in the nation, Sherwin-Williams is solidly profitable. In addition, the company has increased its dividend every year since 1979. Currently yielding around 3.2%, this stock is a good play for income and capital gains (in that order).
Tangibly Better
While some investors and analysts may call Williams-Sonoma (NYSE:WSM) a pass, the value investor sees things differently because of the company's net tangible assets. On April 9, Williams-Sonoma closed lower than its net tangible assets per share, or $10.17 versus $10.74. Meanwhile, Bed Bath & Beyond (NYSE:BBBY) trades at 2.2 times its net tangible assets per share. Sure, Williams-Sonoma's earnings have dried up, but they company will come back. At this point, the downside is minimal.
Retail Stabilization
After the market close on April 7, BedBath
Bottom Line
It's not easy recommending stocks when the market has been decimated over the past couple of years. But that's precisely what makes these ideas so compelling. History favors the bold. And that includes investors.
IN PICTURES: 10 Biggest Losers In Finance
The ETF In A Nutshell
The SPDR S&P Homebuilders ETF trades on the New York Stock Exchange. It closely matches the returns and holdings of the S&P Homebuilders Select Industry Index. With 22 holdings, $612.56 million in assets and a dividend yield of 2.12%, the
ETF is probably the best way to play the homebuilding industry. In it, investors gain a diversified portfolio of mostly large cap stocks. Down as much as it is makes it a good time to buy, although dollar-cost averaging is a smart play as well. (To learn more about exchange-traded funds, check out Singling Out Sector ETFs.)
On April 8, Pulte Homes (NYSE:PHM) announced its acquisition of competitor Centex (NYSE:CTX) for $1.3 billion in stocks. The merged company will be the largest homebuilder in the country, combining Pulte's focus on retirement communities with Centex's focus on first-time homebuyers. Pulte shareholders will own 68% of the new company with Centex shareholders owning the rest. The deal marks the beginning of what should lead to further consolidation in the homebuilding industry. February new home sales were up 5% from January, a sign the real estate industry might have hit bottom.
Cheer Up The House
With housing prices cratering, Americans who once considered moving are now making do with the same old house. As a result, one of the fastest and cheapest ways to brighten up a home is to paint it. And that's where Sherwin-Williams (NYSE:SHW) comes in.The largest paint seller in the nation, Sherwin-Williams is solidly profitable. In addition, the company has increased its dividend every year since 1979. Currently yielding around 3.2%, this stock is a good play for income and capital gains (in that order).
Tangibly Better
While some investors and analysts may call Williams-Sonoma (NYSE:WSM) a pass, the value investor sees things differently because of the company's net tangible assets. On April 9, Williams-Sonoma closed lower than its net tangible assets per share, or $10.17 versus $10.74. Meanwhile, Bed Bath & Beyond (NYSE:BBBY) trades at 2.2 times its net tangible assets per share. Sure, Williams-Sonoma's earnings have dried up, but they company will come back. At this point, the downside is minimal.
Retail Stabilization
After the market close on April 7, Bed
Bottom Line
It's not easy recommending stocks when the market has been decimated over the past couple of years. But that's precisely what makes these ideas so compelling. History favors the bold. And that includes investors.
by
Will Ashworth
Will Ashworth lives and works in Toronto, Canada. He's worked in and around the financial services industry for much of his adult life. He loves investing and is passionate about helping others learn how to put their money to work.
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