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Make Money on the Housing Recovery, the Easy Way: Standard Pacific Corp. (SPF), Hovnanian Enterprises, Inc. (HOV)

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some home construction-related stocks to your portfolio, the iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

Hovnanian Enterprises, Inc. (NYSE:HOV)The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF’s expense ratio — its annual fee — is a relatively low 0.47%.

This ETF has performed rather well overall, topping the world market over the past three and five years. In 2012, it posted a whopping 79% gain. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why home construction?
This is a cyclical industry, and the cycle has been on an upswing, as a recovery in housing is resulting in more homes being built. A general economic recovery should lead to more remodeling and maintenance work, too, boosting business for companies tied to the industry. Indeed, many companies in this group more than doubled in value in 2012.

More than a handful of home construction-related companies had strong performances over the past year. Hovnanian Enterprises, Inc. (NYSE:HOV) surged 106%, for example, even though not so long ago some thought it might end up out of business.Standard Pacific Corp. (NYSE:SPF), another builder, gained 84%. These two companies have had a harder time of it than some rivals as they focus more on entry-level homes, with a clientele that has been more severely hurt by the recent recession. Strong home sales reports have been boosting these stocks.

USG Corporation (NYSE:USG) advanced 64%, specializing in gypsum and building materials such as wallboard, cement board, and joint compound. Revenue, which had been falling for several years, has started moving in the other direction in the past few years, and its bottom line is expected to move from the black into the red soon. Its recent earnings report featured much improvement, though it disappointed some analysts with its earnings.

Paint giant Sherwin-Williams Company (NYSE:SHW) soared 60%. It recently bought global paint giant Comex, based in Mexico, for $2.3 billion. Some don’t like that the deal will add to the company’s debt, but others see it as a smart strategic move. Its fourth-quarter earnings report featured record revenue up 8.8% and earnings up more than 50%. Some see the stock as pricey now, but with a promising future. Management boosted its dividend by 28% recently.

The big picture
Long-term demand for housing and construction isn’t going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies — and make investing in and profiting from it that much easier.

The article Make Money on the Housing Recovery, the Easy Way originally appeared on Fool.com.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool recommends Sherwin-Williams.

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