Over the last year, the 15 companies in the DowÂ Industrials (DJIA) thatÂ repurchased the most sharesÂ returned roughlyÂ 9%. In contrast, the 15 companies in the DJIA that repurchased the least number of sharesÂ registered a less robustÂ 3%.
Granted, this Morningstar study is not particularly extensive. YetÂ market pickers oftenÂ covet corporations that engage in share buybacks, and the investment community frequently tags along for the ride.
Naturally, there’s an ETF for tapping into the process. The PowerShares Buyback Achievers Fund (PKW)Â employs aÂ modified market-cap-weighted approach, where no stock can account for more than 5% of the portfolio weight.
Unfortunately, PKW is an expensive exchange-traded vehicle with a .60% expense ratio. In addition, with an average daily tradingÂ volume of just 14000Â and a mere $60 million in net assets,Â the bid-ask spread tends to be wide;Â difficulty entering or exiting a position can be yet another cost toÂ active investors.
That said,Â PKW’s outperformance in bull market uptrends is impressive.Â Over the past 3 years, the “buyback” proxy hasÂ significantly out-hustled the broaderÂ S&P 500.
Buy In To Buybacksâ€“ Michael Rawson, MorningstarÂ
Currency-Hedged ETFs Lower Volatilityâ€“ Dennis Hudachek, Index Universe
Social Media ETFs: Time To Buy?â€“ Staff, Zacks
Make Money In Growing Software Companies The Easy Wayâ€“ Selena Maranjian, Motley Fool
Surprise: USO Gets Major Attention â€“ Staff, The Stock Masters
Disclosure Statement: ETF ExpertÂ is a web log (â€ťblogâ€ť) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.