Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some building-and-construction-related stocks to your portfolio but don't have the time or expertise to hand-pick a few, the PowerShares Dynamic Building & Construction Portfolio 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.
The basics ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is 0.63%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed well, topping the world market over the past three and five years. 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 building-and-construction-related companies? Our global economy is on the upswing, and the housing market is recovering, in the U.S. and elsewhere. This industry is cyclical, but the cycle is in its growth phase now.
More than a handful of building-and-construction-related companies had strong performances over the past year. Hyster-Yale Materials Handling Inc (NYSE:HY) , specializing in lift trucks and aftermarket parts, has more than doubled in less than a year. In its second quarter, revenue grew 10% and operating income popped by 46%. Its backlog grew, too, by 21%. The stock yields 1.1%.
Lumber Liquidators Holdings Inc (NYSE:LL) surged 111% and has rewarded investors handsomely, but it has also alarmed some, with a federal investigation into its flooring imports sending shares down recently. Some steer clear of any companies under investigation, but others sense a buying opportunity here or are taking a wait-and-see approach. Lumber Liquidators also faces some product safety questions. Meanwhile, with a forward P/E above 30, the stock doesn't seem to be a screaming bargain at the moment.