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Investing in Lennar through Homebuilder ETFs

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ETFs – the best way to meet asset allocation

Asset allocation is a primary factor responsible for investment returns. ETFs are a convenient way for investors to build a portfolio that meets specific asset allocation needs.

For example, an investor seeking an allocation of 70% stocks and 30% bonds can easily create such a portfolio with ETFs. In this article, we’ll see how sector-specific and sector-agnostic ETFs invest in Lennar Corporation’s (LEN) stock.

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Sector-specific ETFs

Lennar (LEN) is a major stock on the New York Stock Exchange with a market capitalization of $10 billion. It’s part of key stock market indices such as the S&P 500 index.

Consequently, Lennar sees allocation in major sector-specific homebuilder ETFs such as the SPDR S&P Homebuilders ETF (XHB). XHB has a 3.36% stake in Lennar. The iShares Dow Jones U.S. Home Construction Index Fund (ITB) has the highest exposure of 10.8%. The smallest homebuilding ETF, the Dynamic Build & Construction ETF (PKB), has exposure of 4.96% in the stock.

Homebuilder ETFs have investments in other stocks such as Toll Brothers (TOL) and D.R. Horton (DHI).

The SPDR S&P Homebuilders ETF (XHB) has an asset base of $1.9 billion and an expense ratio of 0.35%. The iShares Dow Jones U.S. Home Construction Index Fund (ITB) has an asset base of $2.1 billion and an expense ratio of 0.45%.

Sector-agnostic ETFs

The holdings of a particular company in an ETF depend on the investment objective of the ETF. Consequently, sector-specific ETFs should have a higher exposure to companies in the sector than sector-agnostic ones. You can see the holdings of various ETFs in the above chart.

Sector-agnostic ETFs such as the SPDR KBW Mortgage Finance ETF (KME), the S&P 500 Pure Growth ETF (RPG), and the S&P Equal Weight Consumer Discretionary (RCD) also have exposure to Lennar (LEN).

KME has a 2.45% stake in Lennar (LEN) followed by RPG with 2.03% and RCD with 1.31%. The S&P 500 Pure Growth ETF (RPG) has an asset base of $2 billion and an expense ratio of 0.35%.

In addition to what we’ve already seen above, homebuilders such as Lennar (LEN) are also affected by a variety of government regulations. Investors should read Market Realist’s How housing regulations have shaped the market for investors to find out how those regulations affect homebuilders.

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