U.S. Markets closed

Wide Moat ETF Beats its Buffett Stocks


The Market Vectors Wide Moat ETF (MOAT) is an ETF built on the principles of investing in companies with noteworthy competitive advantages.

MOAT tries to reflect the performance of the Morningstar Wide Moat Focus Index, which utilizes a “wide moat” investment strategy that hones in on companies with a competitive advantage. 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]

So it stands to reason that MOAT, which has $505.5 million in assets under management, would be home to a few stocks that Buffett himself would own. As of Dec. 16, MOAT is home to three stocks that are currently held in Berkshire Hathaway’s (BRK-A) equity portfolio: Bank of New York Mellon (BK) and Dow components Coca-Cola (KO) and General Electric (GE). MOAT also features a stake in Berkshire’s “B” shares.

As MOAT is essentially an equal-weight ETF, the weights on those stocks within the fund average out to roughly 5% apiece.

Given Buffett’s penchant for finding deep value plays and generating market-beating returns, ambitious investors might have thought at the start of the year that pulling the Berkshire holdings from MOAT would be a better idea than owning the ETF outright. [Wide Moat ETF Soaks up Buffett's Approach]

That strategy would have led to some decent returns, but it would not have beaten MOAT. In fact, of the four aforementioned stocks, only General Electric outpaced MOAT this year. MOAT is up nearly 25% while GE is up 26.4%.

MOAT’s almost 25% is also better than the average 22.8% return generated by Bank of New York Mellon and Berkshire’s “B” shares and the ETF simply trounced the market-lagging 4.4% return of Coca-Cola, one of Berkshire’s largest equity holdings.

MOAT has also notched a solid year despite Oracle (ORCL) and Excelon (EXC) both residing in the red.

It looks like health care did the trick for MOAT in 2013. That sector, which has outperformed the S&P 500 this year, is MOAT’s largest sector weight at 21%, more than 500 basis points ahead of financial services. [Health Care ETFs Beating S&P 500 in 2013]

Market Vectors Wide Moat ETF

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of MOAT.

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.