The Market Vectors Wide Moat ETF (MOAT) has proven sturdy this year even as U.S. stocks have seesawed, again underscoring the advantages of investing in companies with deep competitive moats.
Warren Buffett is also well known for his preference for large, established companies with wide economic moats that help outperform the competition. [An ETF Patterned on Warren Buffett's Wide-Moat Wide Moat Approach]
“Morningstar has taken the concept and built it into an index tracked by the MOAT ETF. As Morningstar sees it, companies with wide moats are more valuable, have more durable excess returns on capital, are more resilient and often have shares prices that are underappreciated, which creates investment opportunity,” writes Roger Nusbaum for TheStreet.
“The index underlying the funds is constructed by equal weighting the 20 stocks that fare well in a valuation screening and also have a high wide moat rating from Morningstar’s analyst team. The index is rebalanced quarterly,” notes Nusbaum.
Up 1.3% this year, MOAT applies and equal weight methodology to its 21 holdings. Familiar names in that group include Oracle (ORCL), eBay (EBAY), Buffett’s own Berkshire Hathaway (BRK-B) and two of Berkshire’s largest equity holdings: IBM (IBM) and Coca-Cola (KO).
Energy and health care names dominate MOAT’s portfolio, combining for 46.3% of the fund’s weight. Energy, with a weight of 15.5%, is the only other sector commanding double-digit representation in MOAT.
MOAT may not be overly diverse at the sector level, but that has not kept investors at bay. Actually, the opposite is true. MOAT crossed $500 million in assets under management earlier this year, but as of Feb. 12, that number was up to $595.2 million. [Wide Moat ETF Reaches $500M in AUM]
Market Vectors Wide Moat ETF
ETF Trends editorial contributed to this post. Tom Lydon’s clients own shares of MOAT and Coca-Cola.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.