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The S&P 500 has lost 9.7% past year (as of Jan 20, 2023) due to red-hot global inflation, Fed rate hikes, hawkish global central banks, Russia-Ukraine war, surging energy prices, zero-COVID policy in China and the resultant occasional lockdowns, global supply chain woes and recession risks. But VanEck Morningstar Wide Moat ETF (MOAT - Free Report) has retreated 7% past year, outdoing the S&P 500.
So far this year, MOAT is up 4.9% versus 3.5% gains in the S&P 500. Though Wall Street is off to a good start to first-quarter 2023, a volatile ride is expected ahead as fears of further Fed rate hikes and global growth concerns will continue to pull strings of the markets. Wells Fargo’s head of equity strategy Chris Harvey thinks that the S&P 500 could reach 4,200 this year, but not before it records a decline from current levels to around 3,400, as quoted on TipRanks.
With the inflation levels still high, central banks still hawkish, tech lay-offs intensifying and economic indicators coming in mixed, investors can expect volatility to rule 2023. Against this backdrop, investors may be looking for ways to navigate through this volatility. Moat investing is one such option.
How MOAT ETFs Are Beating the S&P 500
The term “economic moat” was popularized by legendary investor Warren Buffett who said that he seeks "economic castles protected by unbreachable moats.” In simple words, a moat is a unique competitive advantage that allows a company to outperform others in the same industry over time.
Wide-moat companies have stronger pricing power, Morningstar’s director of equity research for index strategies Lane said lately, meaning they are better-positioned to pass on rising inflation-related costs directly to consumers. And wide- and narrow-moat stocks have outperformed the broader equity market over the past several years, per Morningstar. Over the past five years, MOAT is up 48.2% versus 35.7% gains in the S&P 500 (as of Jan 20, 2023).
Against this backdrop, below we highlight a few wide-moat ETFs that can be tapped now.
The underlying Morningstar Wide Moat Focus Index tracks the overall performance of the 20 most attractively priced companies with sustainable competitive advantages. No stock accounts for more than 3.11% of the 49-stock fund.
Information Technology (32.39%) takes the largest weight in the fund, followed by Industrials (18.13%), Health care (11.79%) and Financials (11.50%). The fund charges 46 bps in fees.
VanEck Morningstar International Moat ETF (MOTI - Free Report)
The underlying Morningstar Global ex-US Moat Focus Index tracks the overall performance of 50 attractively priced companies outside the U.S. with sustainable competitive advantages. The fund holds 70 stocks in the fund.
No stock accounts for more than 2.37% of the fund. Financials (18.87%), Consumer Discretionary (15.14%), Healthcare (14.11%) and Information Technology (12.05%) have a double-digit weight in the fund. China takes the top spot in the fund with about 30% weight while U.K. (16.57%), France (7.84%) and Switzerland (6.07%) round out the top four geographical spots.
The underlying Morningstar US Sustainability Moat Focus Index is rules-based and intends to offer exposure to attractively priced U.S. companies with long-term competitive advantages that have been screened for ESG risks.
The 62-stock fund is heavy on Information Technology (30.68%), followed by Financials (21.70%), Consumer Staples (13.78%) and Industrials (11.29%). No stock makes up more than 2.89% of the fund.
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Here's Why Moat ETFs Are Beating S&P 500
The S&P 500 has lost 9.7% past year (as of Jan 20, 2023) due to red-hot global inflation, Fed rate hikes, hawkish global central banks, Russia-Ukraine war, surging energy prices, zero-COVID policy in China and the resultant occasional lockdowns, global supply chain woes and recession risks. But VanEck Morningstar Wide Moat ETF (MOAT - Free Report) has retreated 7% past year, outdoing the S&P 500.
So far this year, MOAT is up 4.9% versus 3.5% gains in the S&P 500. Though Wall Street is off to a good start to first-quarter 2023, a volatile ride is expected ahead as fears of further Fed rate hikes and global growth concerns will continue to pull strings of the markets. Wells Fargo’s head of equity strategy Chris Harvey thinks that the S&P 500 could reach 4,200 this year, but not before it records a decline from current levels to around 3,400, as quoted on TipRanks.
With the inflation levels still high, central banks still hawkish, tech lay-offs intensifying and economic indicators coming in mixed, investors can expect volatility to rule 2023. Against this backdrop, investors may be looking for ways to navigate through this volatility. Moat investing is one such option.
How MOAT ETFs Are Beating the S&P 500
The term “economic moat” was popularized by legendary investor Warren Buffett who said that he seeks "economic castles protected by unbreachable moats.” In simple words, a moat is a unique competitive advantage that allows a company to outperform others in the same industry over time.
Wide-moat companies have stronger pricing power, Morningstar’s director of equity research for index strategies Lane said lately, meaning they are better-positioned to pass on rising inflation-related costs directly to consumers. And wide- and narrow-moat stocks have outperformed the broader equity market over the past several years, per Morningstar. Over the past five years, MOAT is up 48.2% versus 35.7% gains in the S&P 500 (as of Jan 20, 2023).
Against this backdrop, below we highlight a few wide-moat ETFs that can be tapped now.
ETFs in Focus
VanEck Morningstar Wide Moat ETF (MOAT - Free Report)
The underlying Morningstar Wide Moat Focus Index tracks the overall performance of the 20 most attractively priced companies with sustainable competitive advantages. No stock accounts for more than 3.11% of the 49-stock fund.
Information Technology (32.39%) takes the largest weight in the fund, followed by Industrials (18.13%), Health care (11.79%) and Financials (11.50%). The fund charges 46 bps in fees.
VanEck Morningstar International Moat ETF (MOTI - Free Report)
The underlying Morningstar Global ex-US Moat Focus Index tracks the overall performance of 50 attractively priced companies outside the U.S. with sustainable competitive advantages. The fund holds 70 stocks in the fund.
No stock accounts for more than 2.37% of the fund. Financials (18.87%), Consumer Discretionary (15.14%), Healthcare (14.11%) and Information Technology (12.05%) have a double-digit weight in the fund. China takes the top spot in the fund with about 30% weight while U.K. (16.57%), France (7.84%) and Switzerland (6.07%) round out the top four geographical spots.
VanEck Morningstar ESG Moat ETF (MOTE - Free Report)
The underlying Morningstar US Sustainability Moat Focus Index is rules-based and intends to offer exposure to attractively priced U.S. companies with long-term competitive advantages that have been screened for ESG risks.
The 62-stock fund is heavy on Information Technology (30.68%), followed by Financials (21.70%), Consumer Staples (13.78%) and Industrials (11.29%). No stock makes up more than 2.89% of the fund.