After Keith McCullough went bullish on Home Construction (ITB), a subscriber pointed out the ETF contains our Retail team’s short ideas Lowe’s (LOW) and Home Depot (HD). How does Hedgeye’s Risk Manager in Chief approach bullish ETFs when they contain bearish stocks? 

“ITB is bullish trend at the low end of the Risk Range,” McCullough explains in this clip from The Macro Show. “That will get me to buy anything, or consider it. Then I pull up the top 10 holdings.” 

The three largest holdings in ITB are all bullish: DR Horton (DHI), Lennar (LEN) and PulteGroup (PHM), a home-building company founded by the grandfather of Bill Pulte, who joined Daryl Jones for a Hedgeye webcast on Thursday

“Home Depot and Lowe’s, collectively, make up 8.5% of the ETF,” McCullough adds. “36% is builders exposure (DHI, LEN and PHM). Here’s the key.” 

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Inside Keith McCullough’s Decision to Get Long Home Construction $ITB - TMS Banner