Share repurchase programs are under scrutiny by politicians from both parties, but that is not standing in the way of upside for exchange traded funds (ETFs) focusing on buybacks, including the Invesco Buyback Achievers ETF (NASDAQ: PKW).
PKW tracks the NASDAQ US BuyBack Achievers Index and includes a broader selection of U.S. companies that have effected a net reduction in shares outstanding by 5% or more in the trailing 12 months.
“Politicians like Sens. Elizabeth Warren, Bernie Sanders, Chuck Schumer, and Marco Rubio have derided buybacks’ explosive rise due in large part to the Trump administration’s tax cuts, demanding Congress more fairly regulate what public companies can do with their cash,” reports Business Insider.
Still, companies are buying back their shares at prodigious paces and PKW is up nearly 22% year-to-date.
S&P Dow Jones Indices announced preliminary Q4 2018 S&P 500 stock buyback numbers of $223 billion, which marked the fourth consecutive quarterly record, the longest streak in the 20 years SPDJI has been tracking buybacks. The previous record of $203.8 billion was set during Q3 2018 and the Q4 number was a 62.6% jump from the $137.0 billion reported for Q4 2017.
Where’s The Plan?
For now, it appears politicians are happy to critique buybacks without specific policy proposals in place to suggest alternatives to this deployment of cash.
“The current political debate around share repurchases increases uncertainty around our buyback forecast,” David Kostin, the chief US equity strategist at Goldman Sachs, said in a note to clients out Friday, reports Business Insider. “Given the lack of specific policy proposals, it is difficult to quantify how potential legislation might affect spending on buybacks.”
PKW allocates almost 28% of its weight to the technology sector and 18.55% to consumer cyclical stocks. The financial services and industrial sectors combine for over 31% of the fund’s weight.
“Right now, tech makes up the lion’s share of the ETF’s 173 stocks, commanding 28% of the fund. Consumer discretionary stocks and financials round out the top three at 18.5% and 18%, respectively. The biggest holdings? Citigroup, Apple, Cisco, Oracle, and Union Pacific,” according to Business Insider.
For more information on the buybacks strategy, visit our buybacks category.