Record Buybacks Provide Opportunities for This ETF

“U.S. stock buybacks appear to be hitting new records as companies head into quarterly earnings season, even as some investors worry about the growing threat of inflation, a potential recession and stagnant share prices,” Reuters says. “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.”

Stock buybacks have been more prominent in recent years. The decade-long bull run just before the pandemic saw a number of companies institute stock buybacks.

“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,” Reuters says. “Companies typically buy back their shares when they are feeling confident about the future and view their stock prices as undervalued.”

“Investors are broadly worried about inflation and the threat of a recession on corporate outlooks, which could sour the willingness of companies to return money to shareholders in the form of big buybacks and dividends,” Reuters adds.

Should buybacks continue, investors can play stock buybacks with one ETF: the Invesco BuyBack Achievers ETF (PKW B+). The fund comes with a 0.64% expense ratio as well as a 30-day unsubsidized yield of 0.93% (as of April 14).

The fund is based on the NASDAQ US BuyBack Achiever Index, which is designed to track the performance of companies that meet the requirements to be classified as BuyBack Achievers. The NASDAQ US BuyBack Achievers Index is comprised of U.S. securities issued by corporations that have effected a net reduction in shares outstanding of 5% or more in the trailing 12 months.

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