I was struck by a piece in the Economist last week that asked ‘who are the world’s best investors?’. It’s a simple question, but the answer may come as a surprise. The best investors, it’s argued, are not superstar fund managers like Warren Buffett, nor are they hedge funds or flash boy traders. The best investors are in fact staid corporates who apparently do a good job of buying their own stock. 

David McLean of Georgetown University has done a lot of work on this topic and found that corporate-share sales and buybacks forecast future returns more accurately than the trades of banks, hedge funds, mutual funds and wealth managers.

Other research by Alberto Manconi and others published in 2018 found that “share repurchases are associated with significant positive short-term and long-term excess returns”.

Here’s a highly summarised version

• Issuing shares tends to be followed by below-average stock performance—suggesting companies tend to issue equity at high valuations (investor overpricing) and then subsequently disappoint.

• Buybacks are typically executed when stock is undervalued, generating short- and long-term returns—especially for smaller, beaten-down firms.

• McLean’s work underscores that timing matters: these decisions are often driven by valuation signals, business cycle conditions, and market sentiment. Corporates are uniquely well placed to exploit mispricing of stock – known as arbitrage.

How can I invest in companies buying back their own stock?

You can watch every earnings update for announcements about buybacks or look to thematic ETFs that focus on this activity. 

Invesco Global Buyback Achievers UCITS ETF (SBUY/BUYB)

The investment objective of this distributing fund is to track the price and yield performance of the NASDAQ Global Buyback Achievers Index, which tracks stocks that have effected a net reduction in shares outstanding of 5% or more in the trailing twelve months. 

The top 5 holdings currently are SAP, Wells Fargo, Shell, Alibaba, and RTX with the fund weighted about 55% US and roughly 15% each to the UK and Europe, with the remainder in emerging Asia and Japan.  The fund beat its Global Large-Cap Value Equity benchmark by 5.4% last year and is marginally ahead so far in 2025. The prior two years it was marginally (0.5% and 0.6%) below its benchmark after beating by 2.1% in 2021.

Amundi S&P 500 Buyback UCITS ETF (BYBU)

This fund is designed to track the performance of S&P 500 Buyback Index, which measures the performance of the top 100 stocks with the highest buyback ratios in the S&P 500. Despite 11% annualised returns over the last ten years, this fund has trailed its S&P 500 benchmark over the last ten years, as it has not captured all of the technology-led gains over that period. Top holdings include Utilities NRG Energy and Vistra as well as Ralph Lauren, Dell and GE Aerospace.

However, it’s currently outperforming over the last 12 months with a 14% total return versus around 10% for the S&P 500, which perhaps reflects the market broadening out somewhat.

Bottom Line

Thematic ETFs can help investors diversify their portfolios

Buybacks are just one indicator among a universe of many

Always do your own research