Following a breakneck pace of share repurchases by U.S. companies ($445.3 billion was spent on buybacks in just the first three quarters of 2013), the pace is slowing a bit in 2014.
While 140 companies authorized buybacks last month, up from 130 in February 2013, the authorization was “just” $80 billion, or 32% below the year-earlier period, reports Steven Russolillo for the Wall Street Journal.
The slowing pace of buybacks, if it can really be called that, is not a cause for alarm. Market research firm Birinyi forecasts buyback authorizations are running at a full-year annualized rate of $745 billion, on pace with last year’s total, the Journal reported.
The impact of February’s slack pace of buyback authorizations, if any, has had a negligible impact on the PowerShares Buyback Achievers Portfolio (NYSEArca: PKW). Buybacks slowed in February, but PKW said “So what?” as the ETF gained 8.6%. The $2.97 billion is up 2% year-to-date, roughly the same as the S&P 500, but if U.S. stocks trade higher this year, it would not be surprising to PKW outperform the S&P 500 as it has done in so many previous years. [Buyback ETF Better Than Many Large Repurchasers]
And while share repurchases ebbed a bit last month, that does not mean investors are skirting PKW. Actually, the opposite is true. The ETF has hauled in $403.4 million in fresh assets this year, making it the second-best PowerShares ETF in terms of year-to-date inflows, according to issuer data. Year-to-date and over the past year, 30 and 90 days, PKW is no worse than the third-best asset gatherer among PowerShares ETFs.
One of the cornerstone’s of PKW, holding companies that have effected a net reduction of 5% or more of their outstanding shares in the past 12 months, has proven popular enough for PowerShares to have launched a global equivalent. The PowerShares International BuyBack Achievers Portfolio (NasdaqGS: IPKW) debuted in late February and already has $10 million in assets.[International Buyback ETF Debuts]
Importantly, slowdowns in buyback activity do not hamper PKW’s performance. For example, repurchase authorizations in 2009 and 2012 were lower than in 2008 and 2011, according to the Birinyo data cited by the Journal, but PKW posted an average gain of 22.5% in 2009 and 2012.
PowerShares Buyback Achievers Portfolio