5 Best-Performing Stocks Of The Top ETF Of March

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iShares U.S. Home Construction ETF (ITB - Free Reporttopped the list of the best-performing ETFs in March with impressive returns of about 14%.

Robust demand for homes continued to buoy homebuilders. New home sales increased 8.2% year over year in February and existing homes sales were also up 9.1%, suggesting robust times for the homebuilding industry. Though the sustained rise in mortgage rate is making homeownership more expensive for first-time buyers, the rate is still below the year-ago level of 3.65%. The rates are likely to remain low at least this year on the Fed’s easy money policy.

Additionally, the still stay-at-home culture due to the pandemic has resulted in high demand for big homes, as buyers now want specific spaces for working, schooling, and exercising. The post-pandemic world has led to a demographic shift, with millennials being the largest emerging homebuyers.

However, surging raw material prices of lumber and wood, and increasing construction costs are restricting supply. Lumber has never been more expensive and is currently more than twice the price for this time of the year. According to the National Association of Home Builders, lumber costs have spiked 180% since last April, increasing the cost of building an average single-family home by $24,000.

Crude oil, a starting point for paint, drain pipe, roof shingles, and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in autumn. Prices for granite, insulation, concrete blocks, and common brick have all hit new records in 2021. According to the Bureau of Labor Statistic’s producer-price index, drywall and ceramic tiles also climbed but are well below the record prices.

Let’s take a closer look at the fundamentals of ITB.

ITB in Focus

This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2.6 billion, it holds a basket of 46 stocks with a heavy concentration on the top two firms. The product charges 42 basis points (bps) in annual fees and trades in heavy volume of around 3 million shares a day on average. It has a Zacks Rank #3 (Hold) with a High risk outlook.

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William K. 2 weeks ago Member's comment

Thanks for the educational article, it is useful.

I did not realize that Lowe's was doing so well. Near me are both a Lowe's and Home Depot, adjacent parking lots, common entrance close. The Home Depot lot is usually crowded, while the lot at Lowe's has a wide choice of spot available, and the aisles are seldom crowded. Thus I would have guessed that Lowe's was struggling, evidently not.

The puzzle is in the rise of the prices of building materials, given that whatever has changed is not obvious. Or is it that all of the suppliers decided to raise prices to increase profits, just because they could?