PKW ETF

The record number of share buyback approvals shows that US large companies have strong cash flow and are financially stable, while low merger and acquisition activity is supporting these buybacks. I maintain a buy recommendation for the Invesco BuyBack Achievers ETF, even though it has a relatively high expense ratio and varying liquidity. PKW provides a value-focused portfolio with a low price-to-earnings ratio, but it does come with some cyclical risks and is heavily invested in the Consumer Discretionary sector.

The Invesco BuyBack Achievers ETF invests in companies that regularly buy back their shares, providing a portfolio that is focused on value with a P/E ratio of 14.3x. Its investments are spread across different sectors, with a strong emphasis on consumer discretionary and industrials, while having less exposure to technology, consumer staples, and utilities. With its low valuation and potential for high growth, PKW is a compelling option compared to standard dividend and value ETFs.

PKW's strategy is focused on U.S. companies that are executing share repurchase programs. PKW's portfolio has a value tilt. It has an adjusted EY higher than that of IVV. Its quality is comparatively strong, but its growth characteristics are lagging. With a few robust years in the books, PKW was nonetheless unable to consistently outperform IVV and a few peers.

Stock buybacks are back in vogue this year. Stock buybacks by S&P 500 companies increased 9.9% year over year and 8.1% sequentially in the first quarter of 2024.

The Inflation Reduction Act contained a controversial though bipartisan provision that applied a 1% levy to companies' share repurchase activities. However, data indicate that tax isn't yet hurting stock buybacks.

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).

The Invesco BuyBack Achievers ETF invests in companies that have reduced their shares outstanding by at least 5% in the past year.

The Invesco BuyBack Achievers ETF tracks the NASDAQ U.S. BuyBack Achievers Index. PKW has performed nearly in line with the S&P 500 since its launch in 2006, delivering strong risk-adjusted returns. The Fund has significantly outperformed value-based products.

Stock buybacks can be controversial. A company uses its cash to buy its own shares in the open market.