Apple’s Buyback Effort not Good Enough for Buyback ETF

ETF Trends

In 2012, Apple (AAPL) announced a $10 billion share repurchase program.

Feeling the pressure to make better use of its massive war chest, the iPad maker upped that buyback to plan to $60 billion in an April 2013 announcement.  In fiscal 2013, the California-based company bought back $22.9 billion of its own stock.

That made Apple the largest repurchaser in the U.S. last year, quite a feat considering that 2013 was a banner for year for share buybacks. Members of the S&P 500 increased share buybacks by 8.6% during the third quarter to $128.2 billion up from the $118.1 billion spent on share repurchases during the second quarter, according to S&P Dow Jones Indices. Fourth-quarter data has not yet been published. [Stock-Picking Buybacks Sort of Works]

Despite Apple’s appetite for its own shares, it has not repurchased enough to qualify for admission to the PowerShares Buyback Achievers Portfolio (PKW). PKW, home to $2.51 billion in assets under management, has standards. Put simply, not every company repurchasing its stock makes PKW’s cut.

The tracks the NASDAQ US BuyBack Achievers Index, which “is comprised of US securities issued by corporations that have effected a net reduction in shares outstanding of 5% or more in the trailing 12 months,” according to PowerShares.

Issuer data also indicates PKW was rebalanced in January and Apple is nowhere to be found among its nearly 180 holdings. [Buybacks Reach Highest Level in Six Years]

Apple has yet to find a home in PKW despite the ETF’s almost 17% weight to technology, the fund’s second-largest sector allocation behind consumer discretionary. Oracle (ORCL) and Yahoo (YHOO) are among the tech stocks held by PKW.

An educated guess is that Apple was not able to repurchase 5% of its shares from January 2013 to January 2014. By some estimates, Apple needs a shares outstanding count of 893 million or less to qualify for admission to the NASDAQ US BuyBack Achievers Index. The company currently has just under 892 million shares outstanding.

PKW rebalances next in April, so it may be just a short time before the ETF has some Apple in its portfolio. Of course, Apple does not need to be in another ETF. It already dominates plenty. [Of Google and ETFs]

Those wanting Apple to join PKW should be careful what they wish. Shares of Apple are up 10.5% in the past two years, a fraction of the 47.1% gained by PKW.

PowerShares Buyback Achievers Portfolio

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Tom Lydon’s clients own shares of Apple.

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