Many investors prefer dividends as a way of being compensated
by corporate management, but cash-rich U.S. companies have not
been shy about repurchasing their own shares.
U.S. companies repurchased nearly $98 billion of their own
shares in the first quarter.
Moreover, at the current pace, buyback authorizations could
reach $833 billion this year, the best year since 2007 when $863
billion worth of buybacks were authorized,
according to MarketWatch
. All of this should be very good news indeed for the PowerShares
Buyback Achiever Portfolio (NYSE:
It has been. The PowerShares Buyback Achiever Portfolio is up
30.4 percent year-to-date, trouncing the S&P 500 by 940 basis
points. However, this is nothing as the NASDAQ Buyback Achievers
Index, PKW's underlying index, has throttled the S&P 500 over
the past year, three years and five years. To top it all of, PKW
has raked in almost $739 million in assets this year, helping the
fund cross the illustrious $1 billion in AUM mark.
Of the roughly 80
in the PowerShares lineup, only the PowerShares Senior Loan
), the PowerShares S&P 500 Low Volatility Portfolio (NYSE:
) and the PowerShares QQQ (NASDAQ:
) have attracted more assets this year than PKW.
Three Market-Based ETFs Trouncing SPY
The NASDAQ Buyback Achievers Index is comprised of U.S.
companies that have repurchased five percent of their shares over
the trailing 12 months. While that is a
backward looking strategy
, it is one that has obviously served PKW and its investors quite
fell. In fact, it can be said that PKW has defied buyback
Consider this: Of the 10 largest authorizations announced in
the first quarter, a group that includes five members of the Dow
Jones Industrial Average, none of those companies are found in
PKW's lineup. Alright, so one can quibble over the fact that new
authorizations may not be immediately included in the ETF because
PKW is not actively managed and only holds companies that have
repurchased five percent or more of their shares over the
trailing one-year period.
Still, it should be remembered that some new authorizations
are additions to existing to buyback plans. Either way, PKW has
outperformed all 10 of top authorizers from the first
At the end of the first quarter, only the health care and
telecom sectors showed year-over-year growth in buybacks with
most of the growth in telecom share repurchases coming courtesy
of AT&T (NYSE:
according to Factset data
. PKW only has a scant 0.02 percent weight to the telecom sector
and it is not to AT&T.
As for health care, PKW does have an almost 12.4 percent to
that sector, but the ETF is not heavy on health care names, such
as Johnson & Johnson (NYSE:
), that are traditionally thought of as voracious share
repurchasers. At almost five percent, Amgen (NASDAQ:
) is PKW's largest health care holding, though
new drug approvals
and robust pipelines have been the primary catalysts driving
biotech stocks higher this year. That is not to say buybacks have
not helped, but buybacks are not the main match that ignited this
year's biotech fire.
Financials, Tech In the first quarter, technology lead all
sectors with $17.2 billion in share repurchases while financial
services lead in sequential and year-over-year growth, according
to Factset. Visa (NYSE:
) was one of the leaders having repurchased $1.7 billion of its
own shares in the first quarter, but that stock is not even found
in PKW and the ETF has been the superior bet as Visa is up "just"
19 percent this year.
Dow component J.P. Morgan Chase (NYSE:
) repurchased $2.6 billion worth of its own shares in the first
quarter, Factset points out. That stock is not found in PKW,
either. PKW is not bereft of familiar financial services names.
American International Group (NYSE:
), State Street (NYSE:
) and Travelers (NYSE:
) combine for almost 8.5 percent of the fund's weight.
However, the ETF is short on banks and brokers and heavy on
insurance stocks. Insurance stocks
have been among the strongest
financial services performers this year. AIG's 33.1 percent
year-to-date gain proves as much.
As for tech, Oracle (NYSE:
) is PKW's larges holding in that sector. The enterprise software
giant has repurchased over $11 billion of its own stock over the
past year, but the shares are up just 5.7 percent in the that
time. PKW is up 38.4 percent over the same time.
Year-to-date, only three of PKW's top-10 holdings have
outperformed the ETF - AIG, Viacom (NASDAQ:
) and Twenty-First Century Fox (NASDAQ:
) - indicating that when it comes to buybacks, an ETF can be the
better bet than stock-picking.
For more on ETFs, click
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