ETF Talk: Let Hurricane Sandy Propel Your Portfolio Forward

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

The physical destruction caused by Hurricane Sandy need not ruin your investment portfolio. In fact, home builders and home renovation big-box stores could benefit from the need to rebuild homes, office and apartment buildings and, in some cases, entire neighborhoods. One exchange-traded fund that I am eyeing that could ride the post-storm reconstruction wave of Hurricane Sandy is the iShares Dow Jones U.S. Home Construction Index Fund (ITB).

Not only does ITB feature the nation’s biggest publicly traded home building companies, it also includes Home Depot and Lowes. The iShares Dow Jones U.S. Home Construction Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Select Home Construction Index. Companies included in the fund should be among those to benefit the most from the post-storm construction efforts.

Media reports indicate that Hurricane Sandy could inflict a cost of $20 billion before its last remnants dissipate. If that estimate holds, Hurricane Sandy will rank as one of the ten most costly natural disasters in U.S. history.

The fund, which holds $1.450 billion in assets, is comprised mainly of home construction companies, 64.44%; but also features building materials and features firms, 17.09%; home improvement retailers, 13.66%; and furnishings companies, 4.63%. ITB’s top ten holdings feature an array of well-known construction, building materials and home improvement companies. They are: Lennar Corp., 9.70%; Pulte Group Inc., 9.61%; DR Horton Inc., 9.17%; Toll Brothers Inc., 8.30%; NVR Inc., 7.59%; Home Depot Inc., 4.55%; Ryland Group Inc., 4.09%; MDC Holdings Inc., 3.86%; Lowe’s Cos. Inc. 3.85%; and KB Home, 3.65%.

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As the chart above shows, the ETF has been on the rise this year. With the latest disaster, I expect the fund to climb further in the weeks and months ahead as re-construction and renovation spending boost revenues and profits at the companies that ITB’s performance is designed to track.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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It's been a rough go of it for the entire country during the past several days. Though the worst of "Superstorm Sandy" is over for most Americans

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