NEW YORK (TheStreet) -- Last week we looked at the success of the PowerShares Buyback Achievers Portfolio (PKW), which has a market value of nearly $3 billion and has soundly outperformed the S&P 500 during the current bull market.
Now exchange-traded fund provider PowerShares is trying to build on that success with an international version of that ETF: the PowerShares International Buy Back Achievers Portfolio (IPKW).
The new fund adds to PowerShares' lineup of 40-plus smart beta funds. Smart beta funds typically take a broad-based index and then screen it for specific fundamental or qualitative factors in order to boost performance.
These two PowerShares funds screen for companies that have bought back enough of their own stock so as to reduce the number of shares outstanding by at least 5% over the past year.
The basic argument for owning shares of companies that buy back their own shares is that companies must generally be in good financial condition in order to execute buybacks. Buybacks are viewed as a returning of capital to shareholders because a reduced share count increases the earnings per share of the remaining shares and potentially leaves more capital available for dividends.
Although many of the stocks in PKW are large-cap household names such as Pfizer (PFE) or Directv (DTV), that is not the case with IPKW. Each of the top 10 holdings in IPKW are mid-cap and small-cap stocks.
It is also worth noting that the new international fund has only 41 holdings, vs. 177 for PKW. This means IPKW takes more single-stock risk. Nine of the companies in IPKW have weightings of 4% to 5%, vs. just four in PKW.