Share buyback programs swelled in the January through March period, perhaps giving investors more reason to consider exchange traded funds such as the Invesco BuyBack Achievers ETF (NASDAQ: PKW).
“New repurchase announcements by U.S. companies reached over $300 billion in the first quarter, with March showing a strong year over year increase, suggesting buybacks have remained resilient in recent weeks, according to financial data firm EPFR, Informa Financial Intelligence,” reports Noel Randewich for Reuters.
PKW, which follows the NASDAQ US BuyBack Achiever Index, is higher by almost 4%, indicating that there is in fact some ballast by way of share repurchase efforts. PKW’s recent performance could be a sign that companies are positive on what the rest of 2022 has in store despite a rough start to the year for broader equity benchmarks.
“Seen as a major contributor to Wall Street’s gains in the past several years, stock buybacks will be in the spotlight when results are unveiled. Companies typically buy back their shares when they are feeling confident about the future and view their stock prices as undervalued,” according to Reuters.
The $1.42 billion PKW holds 153 stocks — a testament to its index mandating that member firms must reduce shares outstanding tallies by at least 5% over the past year. Translation: PKW is home to companies that are materially reducing their shares outstanding counts.
Putting that into context at the sector level, the Invesco ETF allocates about 51% of its combined weight to two sectors — financial services and consumer discretionary. It’s possible that PKW’s roster expands as 2022 moves along because forecasts call for massive levels of repurchases this year.
“S&P 500 companies plowed around $880 billion into buying their own shares last year, up from $520 billion in 2020, according to S&P Dow Jones Indices,” adds Reuters. “Goldman Sachs in a report last month estimated S&P 500 companies in 2022 will spend $1 trillion buying up their own shares.”
To the point about companies expressing that there’s value in their stocks via buybacks, it’s interesting to note that more than half of PKW’s member firms are considered value stocks compared to just 4% with the growth label.
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