QCOM is the latest company to announce a corporate buyback, which has been a common occurrence over the past several years with companies shrinking their float in the open market via such actions.
Thus, “Buyback” focused ETFs have been rather successful and popular as well as one might expect. The phenomenon of increased buyback activity has helped PKW (PowerShares Buyback Achievers Portfolio, Expense Ratio 0.68%) grow to a $2.92 billion fund, and the fifth largest ETF in general in terms of asset size in the greater “All Cap Equity” ETF category, which of course is populated with many different index approaches unrelated to buyback activity, such as the largest ETF here VTI (Vanguard Total Stock Market, Expense Ratio 0.05%, $54.5 billion in AUM). The Top holding in PKW currently are AAPL (>5.5%), which of course is the largest stock weighed by market capitalization in the S&P 500 Index, and also actively buying its own stock in the open market.
AAPL is followed by HD (>5.2%), IBM (>4.8%), BA (>4.4%), and FOXA (>3.1%). An actively managed fund known as TTFS (TrimTabs Float Shrink ETF, Expense Ratio 0.99%) has also found success in this environment of common buyback activity, having raised more than $204 million in AUM since its October 2011 launch.
According to fund literature, the portfolio managers seek “Float Shrink: We want to invest in companies that reduce their float over time. Most companies shrink the float through stock buybacks, but companies can also reduce the float by taking other actions, such as reverse stock splits or spinoffs.”
Thus, one can see that companies that are involved in corporate buyback activity may be included in the overall portfolio depending on the discretion of the manager, and again this is an actively managed fund, but also Spin-Off stocks and stocks that have experienced reverse-splits.
When we look at the top holdings of TTFS we see WNR (1.11%), WBA (1.09%), EBAY (1.07%), AZO (1.06%), and YUM (1.05%). We note that both PKW and TTFS currently have 5-star Morningstar ratings as well. Finally, in relation to corporate buybacks, we also have an eye on IPKW (PowerShares International Buyback Achievers Portfolio, Expense Ratio 0.55%) which was clearly launched thanks to the success of PKW, having a similar ticker even.
This fund is likely much less known than PKW, and also newer to the market (launched in February of last year), and has a focus on stocks that are domiciled outside of the U.S., but involved in buybacks (Airbus Group >5.8%, Nippon Telegraph >5.6%, Koninklijke Ahold NV >5%).
PowerShares Buyback Achievers Portfolio
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