Buyback Fund Shows Gains

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

The third-best-performing exchange-traded fund (ETF) in the international equity category during the first half of 2015 has a different focus than its counterparts. That fund is PowerShares International BuyBack Achievers Portfolio (IPKW), which invests in international companies that have cut their number of outstanding shares in the past year through the use of buybacks.

View the current price, volume, performance and top 10 holdings of IPKW at ETFU.com.

The intent of this fund, therefore, is too raise the per-share value of the remaining stock outstanding. The use of buybacks is aimed at driving up stock prices by making shares worth more once there are fewer to go.

In addition, the management teams at companies that commit to share buyback programs typically are more disciplined than others due to the need to preserve cash to fund the repurchases. Management teams that do not need to keep cash available for such buybacks or for dividend payments to shareholders have a greater tendency to squander it.

In the market environment for the first half of 2015, the value of buybacks manifested itself as IPKW gained 11.19% through June 30. The fund pays a 2.29% dividend yield in addition to any returns it generates on capital. As this fund has less than $100 million in assets ($45.4 million), it falls beneath my recommended threshold for investment. However, this ETF’s strategy is one that is worth bringing to your attention. The more knowledge you have as an investor, the better you can make informed decisions.

 ipkw

This fund’s top 10 holdings make up 46.47% of its portfolio of investments. Though this represents weaker diversification than many ETFs have, it is still more than could be obtained easily by buying individual stocks. The top holdings include Dollarama Inc., 5.71%; Koninklijke Abold NV, 5.59%; Muenchener Rueckversicherungs-Gesellschaft in Muenchen AG, 5.52%; L’Oreal SA, 4.95%; and Canadian Pacific Railway Ltd., 4.83%.

The fund’s holdings are most concentrated in developed markets, including Japan, Canada, the United Kingdom, Germany and the Netherlands.

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The mission of PowerShares International BuyBack Achievers Portfolio’s (IPKW) to seek out international companies engaged in share repurchases shows no signs of abating. The fund also could be useful for investors who want the opportunity for capital appreciation, as well as income.

Remember to look for the current price, volume, performance and top 10 holdings of IPKW at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about an international small-cap fund. I also invite you to comment in the space provided below.

 

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