In the first quarter, S&P 500 member firms repurchased $236.8 billion worth of their own shares. This marks a nearly 10% increase on a YoY basis. That implies the 1% excise tax on net buybacks hasn’t been a major detriment to this form of shareholder reward.
Likewise, it can also be argued that S&P-500-tracking ETFs derive some benefit from robust repurchase activity. Investors wanting to access ETFs that are true epicenters of share repurchases could consider the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
One reason for that is because those ETFs allocate 52.50% of their rosters to technology stocks. That’s relevant because that sector remains the undisputed buyback king.
“Information Technology maintained its lead in buybacks, representing 24.2% of all buybacks for the quarter. Q1 2024 expenditures increased 1.8% to $57.3 billion. Compared to Q4 2023’s $56.3 billion, it was up 24.8% from Q1 2023’s $45.9 billion expenditure,” according to S&P Dow Jones Indices.
QQQ, QQQM Have Buyback Goods
The buyback credibility of QQQ and QQQM is enhanced at the holdings level. Take the case of Apple (AAPL), which is the third-largest holding QQQ and QQQM. The iPhone has a long-running reputation as a prolific buyer of its own shares. That was on full display in the first quarter.
“Apple continued to dominate the issue level buybacks. [It] again spent the most of any issue with its Q1 2024 expenditure ranking as the 6th highest in S&P 500 history. For the quarter, the company spent $23.5 billion. [That’s up] from Q4 2023’s $22.7 billion (the 10th largest in index history),” according to S&P.
S&P also noted that in terms of the 20 buyback quarters executed by an individual company, 18 were courtesy of Apple. Facebook parent Meta Platforms (META) and Alphabet (GOOG) are prodigious buyers of their own shares in their own rights. That’s pertinent to investors considering QQQ and QQQM. And that’s because those are the ETFs’ top two communication services holdings. They combine for about 10% of the funds’ rosters.
Combined, Meta and Alphabet bought back $33.9 billion worth of their stocks in the first quarter. Another dedicated buyer of its own shares in the January through March period was Nvidia (NVDA). That company is the second-largest holding in QQQ and QQQM.
Nvidia’s Q1 share repurchase activity totaled “$9.5 billion for Q1 2024, up from $3.5 billion in Q4 2023; the 12-month expenditure was $21.3 billion versus $9.5 billion,” noted S&P.
Bottom line: four of the top five share repurchasers in the first quarter are QQQ/QQQM holdings.
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