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ETF Chart of the Day: Home Construction


Today we examine ETFs that carry high P/E ratios (Price To Earnings) comparatively in reference to other ETFs.

Currently, the highest P/E’s in the ETF space belong to the following funds: PSJ (PowerShares Dynamic Software, 25.88), PXQ (PowerShares Dynamic Networking, 24.38), PNQI (PowerShares Nasdaq Internet Portfolio, 24.32), ITB (iShares DJ U.S. Home Construction, 22.83), and FDN (First Trust DJ Internet, 22.73).

When quickly glancing at this list, one can see a rather clear theme, that broader Technology sectors (including Software, Networking, and Internet for example) tend to historically carry higher than average P/E ratios due to the nature of those businesses.

ITB appearing on this list as well is quite interesting, as we point out above in today’s options recap the jaw dropping performance of ITB, having rallied more than 77% just year to date. Thus, the P/E ratio of the fund has climbed during this sector rally as well, and it is feasible that the recent bearish looking speculation in ITB options as well as in related ETF XHB, is perhaps a “valuation call” by fundamentally focused investors that are looking for a potential correction in the Homebuilders/Construction sector.

It will be interesting to watch funds such as these heading into the final weeks of the trading year of 2012 to see if investor behavior is altered at all in terms of a possible acceleration of activity given any year and tax considerations.

iShares DJ U.S. Home Construction

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.