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Is VanEck Morningstar Wide Moat ETF (MOAT) a Strong ETF Right Now?

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Making its debut on 04/24/2012, smart beta exchange traded fund VanEck Morningstar Wide Moat ETF (MOAT - Free Report) provides investors broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Van Eck, and has been able to amass over $10.34 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Morningstar Wide Moat Focus Index.

The Morningstar Wide Moat Focus Index tracks the overall performance of the 20 most attractively priced companies with sustainable competitive advantages.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for MOAT are 0.46%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.12%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

MOAT's heaviest allocation is in the Information Technology sector, which is about 22.20% of the portfolio. Its Healthcare and Financials round out the top three.

When you look at individual holdings, Domino's Pizza Inc (DPZ - Free Report) accounts for about 2.94% of the fund's total assets, followed by Transunion (TRU - Free Report) and Alphabet Inc (GOOGL - Free Report) .

Its top 10 holdings account for approximately 27.04% of MOAT's total assets under management.

Performance and Risk

The ETF has added about 11.31% and is up about 14.16% so far this year and in the past one year (as of 11/01/2023), respectively. MOAT has traded between $61.03 and $83.28 during this last 52-week period.

MOAT has a beta of 1.03 and standard deviation of 19.39% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 55 holdings, it effectively diversifies company-specific risk.

Alternatives

VanEck Morningstar Wide Moat ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $340.97 billion in assets, SPDR S&P 500 ETF has $389.46 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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