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Apple Finally Enters Buyback ETF


After a long wait, Apple (AAPL) has finally repurchased enough of its own stocks to qualify for admission to the NASDAQ US BuyBack Achievers Index meaning the largest U.S. company by market value has also entered the PowerShares Buyback Achievers Portfolio (PKW) .

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.

Apple was close to entering the BuyBack Achievers Index and PKW at the 2014 rebalance (the index makes new additions and deletions once a year in January), but fell just short of the necessary 5% reduction in shares outstanding. Now, the iPhone make is PKW’s largest holding at a weight of 5.42% as of Jan. 30. That is 34 basis points ahead of Dow component Home Depot. [Apple Advances Toward Buyback ETF]

For the 12-month period ending Dec. 17, 2014, Apple reduced its shares outstanding count by 6.8%.

Apple has been one of the largest repurchasers of its own shares in the S&P 500. In the third quarter of last year, the iPad maker bought back $17 billion of its own stock, more than any other S&P 500 member. The company spent $56 billion on buybacks in last year and it doesn’t appear to be done yet. [Solid Year for Buyback ETFs]

Although Apple has $178 billion in cash, more than the market values of all but a small number of S&P 500 member firms, the company said Monday it will sell $6.5 billion in corporate debt to fund buybacks and dividends.

Another technology giant known for being a prolific repurchaser of its shares has also entered PKW. International Business Machines (IBM), which famously boosts its per share earnings via buybacks even as revenue flails, is now PKW’s third-largest holding at a weight of almost 4.9%.

In the first quarter of 2014, only Apple repurchased more shares than IBM among S&P 500 firms. In the second quarter, IBM’s shares outstanding count dropped below 1 billion for the first time since 1999. [IBM Isn't a Factor in Buyback ETFs]

Technology remains PKW’s second-largest sector weight at 20.3% behind the 31.1% the ETF allocates to the consumer discretionary sector. Apple and IBM combine for 10.3% of PKW’s weight, more than PKW’s next 28 tech holdings combined.

PowerShares Buyback Achievers Portfolio


Tom Lydon’s clients own shares of Apple.