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Stock buybacks recently staged a strong comeback from the lull witnessed in 2023. Companies have announced share repurchases of more than $383 billion in the last 13 weeks, up 30% from the year-ago period and the highest since June 2018, per research from Deutsche Bank. This indicates that corporate America is bullish on the U.S. economy.
Investors seeking to ride the share buyback boom may bet on Invesco BuyBack Achievers ETF (PKW - Free Report) .
Buyback Boosters
Tech giant Apple (AAPL - Free Report) led the pack with the announcement of the largest-ever share repurchase worth $110 billion. This was followed by Alphabet’s (GOOGL - Free Report) $70 billion share buyback. Meanwhile, Uber Technologies (UBER - Free Report) announced its first-ever buyback of $7 billion worth of company shares after the company posted its first annual net profit last week since it went public in 2019 (read: ETFs to Buy on Apple's Q2 Earnings Beat, Largest-Ever Buyback).
Energy giant BP plc (BP - Free Report) also reaffirmed its commitment to buy back shares worth $3.5 billion in the first half of the year even as first-quarter profit and cash flow fell more than expected and net debt increased.
Why Buybacks?
A stock buyback, also known as stock repurchase, happens when a public company uses cash to buy shares of its own stock on the open market. Stock buybacks typically increase when earnings rise.
U.S. companies are having their best earnings season in nearly two years. With 80% of the companies in the S&P 500 having already reported, the index is on track to record 5% growth in first-quarter earnings per share per FactSet. This is the biggest year-over-year increase since the second quarter of 2022 and higher than the 3.2% growth analysts had expected prior to the start of the season (read: Time to Tap Wall Street ETFs on Earnings Strength?).
A surge in buybacks will likely boost earnings per share, thereby driving the stocks higher. Investors should note that share buybacks have been the biggest driver of equities over time in the medium term. In recent decades, share buybacks have overtaken dividends as a preferred way to return cash to shareholders.
When a company announces a buyback program, it often signals that management believes the stock is undervalued. This instills confidence in investors and attracts more buyers, potentially leading to an increase in demand and share price.
PKW in Focus
Invesco BuyBack Achievers ETF tracks the NASDAQ US Buyback Achievers Index, which comprises companies that have reduced shares outstanding by 5% or more in the trailing 12 months. It holds 203 stocks in its basket with none of the firms accounting for no more than 5.2% of the assets. Consumer discretionary and financials are the top two sectors, accounting for at least 20% share each, while industrials, healthcare and communication services round off the next three spots with double-digit exposure each.
PKW is the most popular fund in the buyback space, with AUM of $1.1 billion and an average daily volume of 19,000 shares. It charges an annual fee of 62 bps.
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Tap the Stock Buyback Trend With PKW ETF
Stock buybacks recently staged a strong comeback from the lull witnessed in 2023. Companies have announced share repurchases of more than $383 billion in the last 13 weeks, up 30% from the year-ago period and the highest since June 2018, per research from Deutsche Bank. This indicates that corporate America is bullish on the U.S. economy.
Investors seeking to ride the share buyback boom may bet on Invesco BuyBack Achievers ETF (PKW - Free Report) .
Buyback Boosters
Tech giant Apple (AAPL - Free Report) led the pack with the announcement of the largest-ever share repurchase worth $110 billion. This was followed by Alphabet’s (GOOGL - Free Report) $70 billion share buyback. Meanwhile, Uber Technologies (UBER - Free Report) announced its first-ever buyback of $7 billion worth of company shares after the company posted its first annual net profit last week since it went public in 2019 (read: ETFs to Buy on Apple's Q2 Earnings Beat, Largest-Ever Buyback).
Energy giant BP plc (BP - Free Report) also reaffirmed its commitment to buy back shares worth $3.5 billion in the first half of the year even as first-quarter profit and cash flow fell more than expected and net debt increased.
Why Buybacks?
A stock buyback, also known as stock repurchase, happens when a public company uses cash to buy shares of its own stock on the open market. Stock buybacks typically increase when earnings rise.
U.S. companies are having their best earnings season in nearly two years. With 80% of the companies in the S&P 500 having already reported, the index is on track to record 5% growth in first-quarter earnings per share per FactSet. This is the biggest year-over-year increase since the second quarter of 2022 and higher than the 3.2% growth analysts had expected prior to the start of the season (read: Time to Tap Wall Street ETFs on Earnings Strength?).
A surge in buybacks will likely boost earnings per share, thereby driving the stocks higher. Investors should note that share buybacks have been the biggest driver of equities over time in the medium term. In recent decades, share buybacks have overtaken dividends as a preferred way to return cash to shareholders.
When a company announces a buyback program, it often signals that management believes the stock is undervalued. This instills confidence in investors and attracts more buyers, potentially leading to an increase in demand and share price.
PKW in Focus
Invesco BuyBack Achievers ETF tracks the NASDAQ US Buyback Achievers Index, which comprises companies that have reduced shares outstanding by 5% or more in the trailing 12 months. It holds 203 stocks in its basket with none of the firms accounting for no more than 5.2% of the assets. Consumer discretionary and financials are the top two sectors, accounting for at least 20% share each, while industrials, healthcare and communication services round off the next three spots with double-digit exposure each.
PKW is the most popular fund in the buyback space, with AUM of $1.1 billion and an average daily volume of 19,000 shares. It charges an annual fee of 62 bps.