Share buybacks are often popular with investors because they can help improve their overall returns by pushing share prices up. It becomes a good way for a company to give its underperforming stock a boost.
A big reason investors might choose to invest in companies that buy back their shares is that in order to do so, they need to be generating cash flow and producing some strong results. And it’s often discretionary enough that it doesn’t make the company feel obligated to continue buying back shares the way it might if it were paying a dividend. Ultimately, it gives growth investors the best of both worlds.
The good news for investors is that rather than trying to find these stocks, there’s an ETF that already focuses on them. The Invesco BuyBack Achievers ETF (NASDAQ:PKW) holds US securities that have reduced their shares by at least 5% over the past 12 months. Its biggest holdings include Citigroup Inc (NYSE:C), Oracle Corp (NYSE:ORCL) and Apple Inc (NASDAQ:AAPL).
In the past year, the BuyBacks ETF has risen by 11% and has outperformed both the Dow Jones and the NASDAQ, which have earned returns of 10% and 7%, respectively. The ETF has a total expense ratio of 0.63% which is about what you’d expect with similar funds and it’s low enough that it won’t make much of an impact on your overall earnings.
Unlike an ETF full of dividend stocks that might be focused on slow-growing industries, more than a quarter of this ETF’s holdings are in tech stocks and nearly 20% are in consumer discretionary. There’s a lot of diversification that investors can gain from holding this ETF and that’s going to help ensure that there aren’t a lot of big swings in its value.
