The stock market rally has slowed in the late summer, but some value-oriented funds that struggled early in 2023 are starting to find momentum — including one focused on buybacks. The Invesco BuyBack Achievers ETF (PKW) has risen 10.7% over the past three months, accounting for more than 100% of its gains for the year. The SPDR S & P 500 ETF Trust (SPY), by comparison, is up 7.6% over the past three months. PKW 3M mountain The Invesco BuyBack Achievers ETF is outperforming the S & P 500 over the past three months. The Invesco fund has also pulled in more than $500 million in net inflows over the past month, pushing its total assets under management above $1.5 billion, according to FactSet. The PKW buys and holds shares in U.S. companies that have reduced their share count by 5% or more over the past year. The fund does not participate directly in corporate buyback programs. “It’s a value signal based on what management heeds and how they’re allocating the company’s resources,” said Nick Kalivas, head of factor and core equity product strategy for Invesco ETFs. The index that the fund tracks — the Nasdaq US BuyBack Achievers Index — does not take future projections or management announcements of planned stock repurchases into account, Kalivas said. The fund is rebalanced annually. Currently, the PKW’s top holdings including Comcast , Morgan Stanley and ConocoPhillips . The buyback fund’s rally has come as investors placed a greater emphasis on companies that put a premium on cash flow. The Pacer U.S. Cash Cows ETF (COWZ) , for example, has been on a similar hot streak over the past few months. Kalivas said that investors are looking for smarter ways to identify value stocks. “A lot of people view the buyback idea as A, an alternative way to get value, but also thinking of it in some cases as a better way to get value,” Kalivas said. “Because these companies are taking their cash and putting it to work as opposed to looking at financial ratios which could be a little bit stale.” Over the past decade, the Invesco fund has an average annual total return of 10.8%. That is below the returns for the broad S & P 500 but better than that of the iShares S & P 500 Value ETF (IVE) and SPDR Portfolio S & P 500 Value ETF (SPYV) . The Vanguard Value ETF (VTV) , which is the biggest fund in the space, has an average total return of 10.2% over the past decade. The PKW’s outperformance over value funds comes despite an expense ratio of 0.61%, which is higher than those competitors. The fund also pays a small yield, currently about 1.1%, which comes from the dividends paid by its holdings, Kalivas said. Disclosure: Comcast is the parent company of NBCUniversal, which includes CNBC.
