NEW YORK (TheStreet) -- U.S. companies would be far better off in the long term reinvesting in their businesses rather than buying back their own shares. And according to Ben Fulton, CEO of Elkhorn Investments, so would their shareholders. 

"The S&P 500 Capex Efficiency Index has had about a 300 basis point outperformance over a nearly 20-year time frame," says Fulton. "It shows a great silent success and I think active fund managers have known about this for a long time, but the ETF industry has not been able to participate."

Until now that is. Fulton, formerly the Managing Director of Global ETFs at Invesco PowerShares, recently launched the Elkhorn S&P 500 Capital Expenditures Portfolio ETF (CAPX) to track the index.

The ETF, which sports an expense ratio of 0.29%, provides exposure to the 100 constituents of the S&P 500 which have exhibited the strongest history of capital discipline over the near term. Fulton says the index focuses on capex efficiency, not simply the dollars spent on R&D.

"Most importantly, the history has to be an improving capex to sales ratio," says Fulton. "It's not just a matter of reinvesting. They have to be great at reinvesting and driving revenue."

In Fulton's opinion, buybacks are often compensation driven and may only boost earnings over a short period. Investing in R&D helps a company over the long term, even if it goes against an activist's immediate wish to return cash to shareholders.

"The one way our economy is finally going to turn around is if companies grow and add jobs," says Fulton. "And you can't count on the government to do that."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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