Make Money in U.S. Home Construction the Easy Way

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the American homebuilding industry to take off eventually, then the Dow Jones U.S. Home Construction Index Fund ETF (NYSE: ITB  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The construction ETF's expense ratio -- its annual fee -- is a relatively low 0.47%.

This ETF doesn't sport the most attractive performance record, but that's not surprising, given the state of the U.S. housing market during the relatively short life of the fund. It underperformed the S&P 500, on average, over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With a low turnover rate of 22%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Several home-construction-related companies had strong performances over the past year. Paint giant Sherwin-Williams (NYSE: SHW  ) , for example, gained 19% as it fought rising raw materials costs and offset them by raising its prices. Home builder Pulte Homes (NYSE: PHM  ) , up 14%, has been impressive lately, reporting revenue up slightly over year-ago levels and orders up 8%. Profit margins have also been rising because of effective cost-cutting, as the company sold some less lucrative land lots. Pulte is aiming to pay down debt, too.

Like other companies in this arena, Lowe's (NYSE: LOW  ) is waiting for the housing market to turn around. But in the meantime, it's still been able to do well serving the needs of remodelers and repairers, and buying back stock to reward shareholders.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Gypsum and wallboard concern USG  (NYSE: USG  ) , for instance, shed about 26% over the past year -- though it's been on the rise in recent months, partly due to promising news from some homebuilders such as Pulte. Having emerged from bankruptcy protection a while back, it may still end up making its investors good money

The big picture
Demand for new homes in the U.S. will eventually pick up, once the oversupply that built up in recent years is worked through. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

Learn about the 5 ETFs That Could Soar in 2012. And if you're looking for some great investments beyond ETFs, consider these 12 Dividend Stocks for 2012.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter @SelenaMaranjian, holds no position in any company mentioned. Click here to see her holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Sherwin-Williams and Lowe's, as well as writing covered calls on Lowe's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1785899, ~/Articles/ArticleHandler.aspx, 10/21/2016 6:40:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:02 PM
LOW $70.65 Up +0.76 +1.09%
Lowe's CAPS Rating: ****
PHM $19.06 Down -0.14 -0.73%
PulteGroup CAPS Rating: ***
SHW $277.14 Up +1.31 +0.47%
Sherwin-Williams CAPS Rating: ****
USG $26.73 Up +0.83 +3.20%
USG CAPS Rating: ****