These 2 Hated ETFs Have Outperformed The Market

Two sectors that the bears love to hate are biotech and homebuilders. The "bubble" in biotech has been called out numerous times over the last few years, while the housing rebound is supposedly a "sucker's rally," according to the naysayers.

The argument against biotech stocks has focused on the valuations of the stocks. While this argument may be true for the smaller, money-losing stocks in the sector, the large-cap names are trading at valuations more attractive than the overall market.

The homebuilder bears will concentrate their argument that the U.S. economy is not on stable ground, and that first-time homebuyers are not coming back into the market.

Last month, 29 percent of home purchases were first-time buyers, the first increase in the number since last November.

Investors do not need home prices to get back to pre-bubble prices to make money in the sector, as long as the improving trend continues the stocks should outperform.

Highlighted below are ETFs from both the biotechnology and homebuilders sectors, which have performed well despite being widely scrutinized.

The iShares U.S. Home Construction ETF ITB tracks 37 U.S. companies that are in some way involved with the construction of residential homes.

The top weighted sectors in the ETF are household durables at 70 percent and building products at 13 percent.

The top individual holdings include D.R. Horton, Inc. DHI making up 10.8 percent of the ETF, Lennar Corporation LEN at 10.7 percent and Pulte Homes, Inc. PHM at 9 percent.

Over the last 12 months, ITB is up 17 percent, up 26 percent over the last six months. The ETF is up nearly 10 percent during the first quarter of 2015, as it rallied to its best level in over seven years.

The First Trust NYSE Arca Biotechnology Index ETF FBT consists of 20 biotechnology companies that are involved with the process of developing products or providing a service.

The top holdings include Intercept Pharmaceuticals Inc ICPT making up 5.8 percent of the ETF, Pharmacyclics, Inc. PCYC at 5.2 percent and Celldex Therapeutics, Inc. CLDX making up 4.1 percent.

FBT is up almost 17 percent in the first quarter, making it the top performing of the large sector ETFs.