Led by iPhone maker Apple (AAPL), share repurchases by S&P 500 firms surged 59.3% year-over-year in the first quarter to $159.3 billion. That figure is up 23.1% from the fourth quarter of 2013.
“For the 12 months ending March 2014, S&P 500 issues increased their buyback expenditures by 29.0% to $534.9 billion from the $414.6 billion posted during the corresponding twelve month period in 2013. The twelve month high mark was reached in fiscal year 2007, when companies spent $589.1 billion. The twelve-month recession low point was $137.6 billion, recorded in fiscal year 2009,” according to S&P Dow Jones Indices.
California-based Apple repurchased $18 billion of its own shares in the first quarter, topping the quarterly record for U.S. companies it set at $16 billion in the second quarter of 2013.
As a result of the large buyback, Apple reduced its average diluted shares by 7.0% year-over-year leading to a 7.1% increase in net earnings resulting in a 15.2% gain in EPS, said S&P Dow Jones Indices.
Despite Apple’s prolific share repurchase program, the company remains just a minor holding, if that, in the exchange traded funds that use buybacks as part of their screening methodology.
The PowerShares Buyback Achievers Portfolio (PKW) , the largest buyback ETF, still does not include Apple among its lineup. PKW 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. [Buyback ETF Still Shines]
While Apple has been one of the most voracious repurchasers of its own shares for over a year and recently announced it will add $30 billion to its current buyback plan, the NASDAQ US BuyBack Achievers Index only makes new additions and subtractions in January. The other rebalances throughout the year are used to adjust the weights of the current holdings in the index. That means the earliest Apple can gain entry into the index and PKW is January 2015. [Apple Advances Toward Buyback ETF]
The actively managed TrimTabs Float Shrink ETF (TTFS) uses an equal-weight methodology, which the fund’s managers highlight as an advantage. That means while is part of TTFS, it receives a weight of just over 1% in the fund.
TTFS has a lower beta and is less volatile than an equal-weight version of the S&P 500 even though it has more exposure to mid- and small-caps on a percentage basis. The fund crossed $100 million in assets under management in January and has since grown by over 36%. [A Deep Look at the Float Shrink ETF]
Like TTFS, the Cambria Shareholder Yield ETF (SYLD) is not an explicit buyback ETF, but Cambria does combine share repurchases with dividends and balance sheet integrity as the hallmarks for an ETF that has gained nearly 23% in just over a year on the market. SYLD allocates just over 1% of its weight to Apple.
- Investment & Company Information