The PKB (Powershares) ETF created in 10/2005 tracks an index based on a narrow selection of 30 specialized stocks mainly in the homebuilding & construction, construction and engineering businesses.
It is a geographically highly specialized index, composed mainly of US stocks and quoted in USD. The Fund and the Index are adjusted quarterly in February, May, August and November according to various criteria (including quality and timing).
The cost of this ETF is 0.63% in the high average of our selection and the AUM is approximately $ 330m. The replication method is direct and dividends are distributed.
Alternative ETFs: ITB ( iShares, USD), XHB ( SPDR, USD)
Index & components
This ETF is fairly diversified in terms of sub-segments with 35% of the shares related to homebuilding & construction, about 22% in construction & engineering, 10% in machinery & equipment, 6% in building materials , 9% in the forestry industry, 3% in metals and mining ...
PKB is composed of quality stocks like Home Depot or Martin Marietta and has a growth stocks bias, which explains its dynamism. The ETF experienced lower volatility than the US market (S & P500) despite cyclical characteristics related to the construction and construction market (influenced by GDP growth and interest rates).
Otherwise, the pre-crisis peaks (2007) have been exceeded by the end of 2013. The interest of this ETF lies in the originality and quality of its selection. PKB does not replicate exactly its benchmark index (S & P500 Construction & Engineering) due to a different and much more open selection. In this basket of holdings, we will find a number of themes among which the individual or collective construction which is of course very correlated to the American growth which remains sustained at a rate of 2 to 2.5% per year, and also dependent of a reasonably low rate environment, because despite the recent recovery, the 10-year US rates remains at around 2.4%.
The election of Donald Trump was favorable to this sector as the new US president is considering a major infrastructure program that would directly benefit US industry as well as tax cuts. However, the US president has already lost a lot of political capital on a certain number of subjects, and it is not certain that he can carry out his projects which, moreover, are falling behind. It is likely that the president's ambitions will be revised downwards, while the Republicans in power in both houses want to avoid any further slippage in terms of budget deficit. US growth is the other unknown, while the US economic cycle is mature and the Fed is expected to continue to raise rates gradually over the coming months.
Latest developments
PKB's performance was +17% in 2016, significantly higher than the S & P500 (+ 9.5%), and the rise continues in 2017: + 11% compared to + 12% for the US benchmark. The index was stable during the first part of the year, while President Trump lost much of his political capital and markets began to doubt his ability to carry out his reform program.
At the same time, the rythm of increase in interest rates was relatively uncertain. For the past few days, President Trump has returned to the burden of corporate tax cuts he wants to reduce to 20%, a measure that could reach a consensus among Republicans, contrary to the Obamacare reform. Moreover, the Fed's speech gave visibility to the pace of the rate hike, with a rise that became very likely in December 2017 and two more in 2018 under a strong and non-inflationary US growth . This combination is favorable to the US construction industry.
