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Stock buybacks can be controversial. A company uses its cash to buy its own shares in the open market.
PKW tracks 315 US stocks that have effected a 5% net reduction in their shares outstanding over a 12-month period. We pick out some of the major themes that could weigh on PKW's prospects. The risk-reward on the charts does not look appealing.
PKW selects U.S. companies that have reduced shares outstanding by 5% or more in the last year. Fees are 0.61%, and the ETF manages $920 million in assets. The 5% threshold, combined with only utilizing one year's worth of buybacks, leads to high turnover. There is also no mechanism to remove current constituents that pause their buyback programs.
Share repurchases, or stock buybacks, have become increasingly prevalent in tech companies' earnings this year.
Corporate buybacks may surpass $1 trillion for the first time, according to S&P Global.
Invesco BuyBack Achievers ETF gives investors exposure to companies that buy back 5% of their shares or more. Buybacks are great if companies opportunistically buy below "intrinsic" value.
The House of Representatives passed the Inflation Reduction Act on Aug. 12. It now goes to President Joe Biden's desk.
The 1% excise tax on buybacks that is part of the Inflation Reduction Act has spurred questions regarding the implications for investors. In a note to clients, Goldman Sachs' David Kostin estimated that the proposed 1% excise tax on buybacks would reduce earnings per share by about 0.5%, CNBC's Bob Pisani reported on Monday.
Earnings season gets underway in less than two weeks. Firms may attempt to lower the bar by issuing weak EPS guidance.
As prices declined and market volatility rose, companies continued their record-breaking buyback and dividend expenditures in the first quarter and are expected to maintain their buyback activities for Q2 through the ongoing price downturn. The record expenditures led to 17.6% of the companies in the S&P 500 increasing their earnings-per-share by at least 4%, thanks [.