Investors love dividends, and they often love buybacks just as much or more. The reality is that both corporate governance strategies are the most common methods of returning capital to their shareholders. So, what happens when it comes to evaluating exchange traded fund (ETF) investing strategies around stock buybacks? The two key ETFs that 24/7 Wall St. tracks for the evaluation of buybacks are the PowerShares Buyback Achievers ETF (NYSEMKT: PKW) and the AdvisorShares TrimTabs Float Shrink ETF (NYSEMKT: TTFS).

What stands out most is that these are similar strategies on the surface, but the methodology and strategies are actually very different. 24/7 Wall St. has evaluated these ETFs by reviewing the size and stated policy of each, but where things really stand out here is in the top stock holdings of each. This review shows that not all buybacks are created (or viewed) equally.

The PowerShares BuyBack Achievers Portfolio has a market cap of almost $2.7 billion, and its average portfolio holding is almost $51 billion. Average daily volume is close to 400,000 shares. The ETF is based on the Nasdaq U.S. BuyBack Achievers Index, and it normally invests at least 90% of its total assets in common stocks that comprise the index. PowerShares shows that the index is designed to track the performance of companies that meet the requirements to be classified as BuyBack Achievers, comprised of U.S. securities issued by corporations that have effected a net reduction in shares outstanding of 5% or more in the trailing 12 months. The ETF is reconstituted annually in January, and it is rebalanced quarterly in January, April, July and October.

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The PowerShares version has a higher concentration of holdings as the top 10 stocks have more than a 35% weighting in the ETF, seen as follows:

• Home Depot, 5.16%
• Oracle, 5.09%
• Pfizer, 4.92%
• AT&T, 4.80%
• Lowe’s, 3.41%
• General Motors, 2.98%
• Yahoo, 2.94%
• Halliburton, 2.73%
• DirecTV, 2.62%
• State Street, 1.98%

The AdvisorShares TrimTabs Float Shrink ETF has more than $148 million in assets but is much thinner in trading volume at about 20,000 shares per day. It seeks to generate long-term returns in excess of the total return of the Russell 3000 Index, with a goal of less volatility than the index. The fund invests in stocks with liquidity and fundamental characteristics that are historically associated with superior long-term performance, and stock selection is based on extensive historical research from TrimTabs, with a focus on stock prices as a function of supply and demand rather than value.

The AdvisorShares version of the buyback ETF has a much smaller concentration for each position, and the top 10 stocks have a weighting of only about 11% as follows:

• Whole Foods, 1.21%
• Southwest Airlines, 1.15%
• Idexx Laboratories, 1.13%
• Visa, 1.12%
• MasterCard, 1.10%
• General Dynamics, 1.08%
• Western Union, 1.08%
• Harley-Davidson, 1.07%
• Pall Corp., 1.07%
• Expeditors International, 1.06%

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It almost seems hard to imagine that the top 10 holdings of each ETF overlap in sectors only. None of the top stocks are the same at all. Two views on one issue, two entirely paths to get there.

As far as the returns, including dividends, through the close of November 10, 2014, so far year-to-date: the PowerShares ETF was up 8.95% and the AdvisorShares ETF was up 11.53%. Those total returns in 2013, gain adjusted for dividends, were 45.5% for the PowerShares ETF and 43.5% for the AdvisorShares ETF.

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