ITB vs. XHB ETF – Which Should You Choose to Follow Buffett?
Many readers may be familiar with another popular homebuilder foundation, the ETF SPDR S&P Homebuilders ETF (New York: XHB). So why should an investor looking to invest like Buffett choose ITB over XHB?
The answer is that while it owns XHB Lennar, DR Horton, and NVR, it doesn’t give investors as much exposure to these three stocks as ITB does. Indeed, as you can see in the table below, none of these three names occupy a place within XHB’s 10 largest holdings.
Within the XHB, DR Horton’s weight is just 3.7%, Lennar’s is 3.7%, and NVR’s comes in at 3.6%.
Both are good ETFs, which is not to say that ITB is a better ETF than XHB, but for readers looking to invest like Buffett’s, ITB is clearly the better choice as it has much larger positions in its three new holdings.
Are ITB Stocks Bought, According to Analysts?
Turning to Wall Street, ITB has a Moderate Buy consensus rating, with 56% of analyst ratings being Buys, 36.7% Holds and 7.3% Selling. At $96.25, the ITB share price average target It denotes an upside potential of 8.54%.
Long lasting performance
Homebuilding is known to be a cyclical industry, but looking at it over the years to smooth out its ups and downs, on average, ITB has had some pretty solid returns. As of the end of last quarter, ITB’s three-year total annualized return was an impressive 25.4%. Using the same time frame, over the past five years, the ETF’s five-year annualized return has been 18.3%, and over the past ten years, it’s had a total annualized return of 14.9%.
These results mean that ITB has outperformed the broader market over the same time frame – as of the end of the last quarter, Vanguard S&P 500 ETF (New York: VOOThe total annual returns for three, five and ten years were 14.6%, 12.3% and 12.8%, respectively.
Additional considerations
One minor downside to ITB that investors should note is that while it’s not an expensive ETF in terms of fees, it’s not particularly cheap either, with an expense ratio of 0.40%. This means that an investor who puts $10,000 into an ITB will pay $40 in fees in the first year. Over the course of a decade, those fees have increased, and the same investor will pay $505 in fees, assuming the expense ratio remains the same and the fund returns 5% annually.
It must be said that the expense ratio is not in line with its closest competitor, XHB, which charges an expense ratio of 0.35%.
13F filings that investment firms file with the SEC give investors a window into the portfolios and trades of major investors like Buffett. Investors should always do their own research before making an investment, but knowing and following the moves of great investors all the time is a great starting point when it comes to generating new investment ideas.
Interestingly, all three stocks in which Buffett and his portfolio managers started positions during the second quarter are the same types of businesses. The team at Berkshire Hathaway clearly likes what it’s seeing in the homebuilding space, which has cheap valuations and potential long-term tailwinds. The ITB ETF gives investors the opportunity to gain significant exposure to the industry and all three of Buffett’s new stocks in one investment vehicle.
In the annals of domestic architecture and interior design, certain elements speak volumes about the lifestyle, social structures, and ergonomic considerations of their times. One such intriguing…
There is something truly timeless and comforting about enjoying a pipe filled with your favorite tobacco blend. Whether you’re an experienced pipe enthusiast or just starting to…
The Internet is obsessed with animals. Whether it’s watching cat videos, reading about rescued stray dogs, or searching for information about wild animals, we can’t get enough….
Lorne Grabher, a man from Canada, recently emerged victorious in a legal dispute concerning his customized license plate featuring his family name. For a quarter of a…
Jase and Missy Robertson’s journey is marked by resilience and strength, particularly in facing their daughter Mia’s cleft lip and palate. In a recent revelation, they shared…
In the heart of Lower Manhattan, an unusual 29-story skyscraper, devoid of windows, stands tall and mysterious. Its code name is Titanpointe, and it is located at…