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Here's Why Moat ETFs Are Gathering Investors' Attention
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VanEck Morningstar Wide Moat ETF (MOAT - Free Report) has attracted about $335 million in net flows year to date through January 25. The fund has accumulated net flows of $4.9 billion over the course of a year. The underlying Morningstar Wide Moat Focus Index of the fund tracks the overall performance of the 20 most attractively priced companies with sustainable competitive advantages.
What is Economic Moat?
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 87.4% versus 80% gains in the S&P 500 (as of Jan 26, 2024).
Why MOAT Has Been Gaining Assets
Though Wall Street is off to a moderate start to first-quarter 2024, a volatile ride is expected ahead as global growth concerns will continue to pull strings of the markets. China is not out of woods. The darling of Wall Street – the tech sector – has been laying off massively. Other sectors have not been far behind.
Geopolitical concerns are rife. Tensions in the Red Sea and the Baltic Sea pose risks to oil supplies. Houthi militants in Yemen continue to target shipping in the Red Sea, affecting global supply chains. Additionally, a suspected Ukrainian drone attack on a Russian fuel terminal highlights the ongoing geopolitical threats to fuel supplies. An increase in oil prices can contribute to global inflation, potentially hindering economic growth.
Moreover, investors recently scaled back their expectations for Imminent Fed interest rate cuts. Although the latest inflation data came in at hopeful, the Fed may seek continuation of low inflation before taking decision of rate cuts. In fact, Fed Governor Chris Waller expressed his belief that the Fed could lower interest rates in the coming year as long as inflation remains in check.
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 2.83% of the 51-stock fund. 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 78 stocks in the fund. No stock accounts for more than 2.32% of the fund. The fund charges 58 bps in fees.
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%). No stock makes up more than 2.66% of the fund. The fund charges 49 bps in fees.
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Here's Why Moat ETFs Are Gathering Investors' Attention
VanEck Morningstar Wide Moat ETF (MOAT - Free Report) has attracted about $335 million in net flows year to date through January 25. The fund has accumulated net flows of $4.9 billion over the course of a year. The underlying Morningstar Wide Moat Focus Index of the fund tracks the overall performance of the 20 most attractively priced companies with sustainable competitive advantages.
What is Economic Moat?
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 87.4% versus 80% gains in the S&P 500 (as of Jan 26, 2024).
Why MOAT Has Been Gaining Assets
Though Wall Street is off to a moderate start to first-quarter 2024, a volatile ride is expected ahead as global growth concerns will continue to pull strings of the markets. China is not out of woods. The darling of Wall Street – the tech sector – has been laying off massively. Other sectors have not been far behind.
Geopolitical concerns are rife. Tensions in the Red Sea and the Baltic Sea pose risks to oil supplies. Houthi militants in Yemen continue to target shipping in the Red Sea, affecting global supply chains. Additionally, a suspected Ukrainian drone attack on a Russian fuel terminal highlights the ongoing geopolitical threats to fuel supplies. An increase in oil prices can contribute to global inflation, potentially hindering economic growth.
Moreover, investors recently scaled back their expectations for Imminent Fed interest rate cuts. Although the latest inflation data came in at hopeful, the Fed may seek continuation of low inflation before taking decision of rate cuts. In fact, Fed Governor Chris Waller expressed his belief that the Fed could lower interest rates in the coming year as long as inflation remains in check.
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 2.83% of the 51-stock fund. 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 78 stocks in the fund. No stock accounts for more than 2.32% of the fund. The fund charges 58 bps in fees.
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%). No stock makes up more than 2.66% of the fund. The fund charges 49 bps in fees.