As the market struggles in September, this buyback stock strategy could be a winner

Published Thu, Sep 16 20219:46 AM EDTUpdated Thu, Sep 16 202110:18 AM EDT

Microsoft shares ticked up Wednesday, a day after the company announced a new $60 billion stock buyback program, and the Big Tech name isn't the only corporation announcing share repurchases. Buybacks are picking up this year and have returned to the $200 billion area, according to S & P Dow Jones Indices senior index analyst Howard Silverblatt. As stocks struggle in September, a historically tough month for the market, buyback stocks could be a bright spot for investors. Share repurchases occur when a company buys back its own stock from the marketplace, which lowers the number of outstanding shares and can boost the share price. Many consider it a way to return capital to investors akin to a dividend. Buyback programs have already surpassed 2020 levels at $566 billion year to date versus $307 billion last year, according to JPMorgan's Dubravko Lakos-Bujas. "Periods of significant market weakness are likely to get dampened by accelerated buyback programs," Lakos-Bujas said in a note Wednesday. Technology, financials and communications sectors represent the majority of S & P 500 buyback activity, JPMorgan said. One exchange-traded fund has been tracking the performance of companies buying back shares — and has been outperforming the market this year. The Invesco BuyBack Achievers ETF is based on the Nasdaq U.S. BuyBack Achievers Index, which is composed of companies that have reduced their shares by a net 5% or more in the past 12 months. The fund is up 25.9% in 2021, compared with the S & P 500's 19.3% gain and the Nasdaq Composite's 17.6% return in the same period. Take a look at the fund's top 10 holdings. (Source: Morningstar. As of Sept. 14, 2021) The Invesco BuyBack Achievers ETF includes several technology, communications and financial services names, as well as health care and consumer cyclical stocks. Cybersecurity stock Fortinet snags the top spot in the fund making up more than 6% of the portfolio. The stock price has more than doubled in 2021. Shares of tech company Oracle , the second largest holding in the ETF, have also beat the market this year with a more than 35% gain. Telecommunications stock Charter Communications is next in line making up 5.4% of the portfolio. Shares are up more than 15% in 2021.

Signage at the Oracle headquarters campus in Redwood City, California.

Michael Short | Bloomberg | Getty Images

Microsoft shares ticked up Wednesday, a day after the company announced a new $60 billion stock buyback program, and the Big Tech name isn't the only corporation announcing share repurchases.