5 Best Industrial ETFs

4. Invesco DWA Industrials Momentum ETF (NASDAQ:PRN)

5-Year Performance as of August 13: 69.66%

Invesco DWA Industrials Momentum ETF (NASDAQ:PRN) follows the performance of the Dorsey Wright® Industrials Technical Leaders Index. This ETF was established on October 12, 2006. As of August 11, 2023, the net expense ratio for The Invesco DWA Industrials Momentum ETF came in at 0.60%. The fund’s portfolio comprises 45 stocks. 

Builders FirstSource, Inc. (NYSE:BLDR) is a prominent holding of Invesco DWA Industrials Momentum ETF (NASDAQ:PRN). Builders FirstSource, Inc. (NYSE:BLDR) manufactures and markets building materials, manufactured elements, and construction services across the United States. On August 2, Builders FirstSource, Inc. (NYSE:BLDR) reported a Q2 non-GAAP EPS of $3.89 and a revenue of $4.53 billion, outperforming Wall Street expectations by $1.30 and $290 million, respectively. 

According to Insider Monkey’s first quarter database, Builders FirstSource, Inc. (NYSE:BLDR) was part of 51 hedge fund portfolios, compared to 52 in the last quarter. Ben Jacobs’ Anomaly Capital Management is the largest stakeholder of the company, with 1.5 million shares worth $137.4 million. 

Black Bear Value Partners made the following comment about Builders FirstSource, Inc. (NYSE:BLDR) in its first quarter 2023 investor letter:

“Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 30% of the stock in the last 18 months.

While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into low rate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder. The next 6-12 months could be rocky as people adjust to the increase in pricing and rates. Eventually the housing market should adjust to the new normal (or rates could go down).

Normalized free-cash-flow per share looks to be in the range of $8-$12 per year. At quarter end pricing of ~$89 that implies a free-cash-flow yield of 9-13%. If we owned this business privately and someone offered us this annual cash-flow yield, we would be jumping at it!”