Stock repurchases help drive up earnings per share and often bolster stock prices. However, critics argue that buybacks artificially support the market during a time of stretched valuations and weak corporate earnings. Others warn that too much money spent on repurchases could reduce U.S. economic growth by pushing off long-term investment spending, especially when companies are re-buying stocks during record highs, which make it an inefficient use of money that could be spent on research or development.
“Of course, Washington’s agenda has thus far been delayed, which may explain why share buyback activity is 20 percent lower thus far in 2017, compared to the same period in 2016, according to Societe General. And that may be creating a drag on the performance of buyback ETFs,” reports Financial Advisor.
Year-to-date, PKW is up just 5.5%, well behind the S&P 500.
For more information on the stock repurchases theme, visit our buybacks category.