The pace of stock buybacks by S&P 500 member firms is likely to accelerate this year and in 2025, according to Goldman Sachs. That could renew investors’ affinity for the Invesco BuyBack Achievers ETF (PKW ).
That fund, which follows the Nasdaq US BuyBack Achievers Index, provides exposure to a broad basket of 204 stocks with strong share repurchase trends. PKW also offers durable performance, having returned 36.5% over the past three years, while easily outperforming the S&P 500 during the bear market of 2022.
The $1.09 billion PKW, which turned 17 years old last December, could be ready for another turn in the limelight after buyback activity was slack in 2023 due to tepid earnings growth and companies were looking to keep more cash on hand.
Catalysts for Buyback ETF PKW
In a recent report, Goldman Sachs strategists David Kostin and Cormac Conners forecast that S&P 500 companies will buy back $925 billion worth of their shares this year, a 13% jump from 2023 levels. Important to investors considering PKW is the point that Goldman sees buybacks surging another 16% in 2025, to over $1 trillion.
However, not all buyback programs are created equally, and companies are not legally bound to fulfill any or all of announced repurchased plans. Those points underscore the relevance of PKW, because the ETF’s underlying index mandates that components reduced their shares outstanding tallies by 5% over the 12 months prior to inclusion in the index.
Said another way, there’s a barrier to entry with PKW. And it’s one that works in favor of investors, because it ensures the ETF’s holdings aren’t just announcing buybacks, but that those companies are actually repurchasing their own shares and doing so for size.
“Investors have rewarded companies for engaging in share buybacks more than other uses of cash in recent months,” according to Goldman Sachs.
Due to its index’s weighting methodology, PKW is sector-agnostic. One result of that is that several of the ETF’s holdings appear on Goldman’s popular buyback basket. Those names include Centene (CNC) and McKesson (MKC). Those are two of the ETF’s largest healthcare holdings, and they combine for over 4% of the fund’s roster.
PKW allocates just 8.66% of its weight to the energy sector, but that group is fertile territory for share repurchase efforts. Marathon Oil MRO and Valero VLO are two of the energy names in the Goldman buyback basket. They’re also two of PKW’s energy holdings, and combine for more than 2% of the ETF’s portfolio.
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