Swimming in A Wide Moat

One trait found among many successful companies is the quality of competitive advantage, or “moat.”

This means that competing with these companies is difficult, whether due to significant barriers to entry in the industry or other factors such as important patents. VanEck Morningstar Wide Moat ETF (MOAT) is an exchange-traded fund (ETF) that invests in an equal-weighted basket of U.S. companies determined by stock rater Morningstar to be among the “wide moat” companies with the highest fair values and subjective economic rating.

The companies among MOAT’s holdings span a variety of industries, from tech and biotech firms to giants like Amazon (AMZN) and Wells Fargo (WFC).

Year to date, this fund has struggled by dropping 20%. However, over a longer time frame, its performance follows a fundamentally upward trajectory, as its value doubled in a less than four-year span from mid-2018 to earlier this year. It has recently begun to recover from a precipitous October tumble, along with much of the market. But its strategy may be more useful for long-term performance than short-term variation.

Chart courtesy of www.StockCharts.com

The ETF’s expense ratio of 0.47% is ordinary and easily more than paid for by its 1.37% dividend yield. Nearly $6 billion in net assets makes MOAT a relatively heavy hitter.

Among the stocks owned by this fund are Biogen Inc. (BIIB), 3.47%; Etsy, Inc. (ETSY), 2.98%; MercadoLibre, Inc. (MELI), 2.92%; Gilead Sciences, Inc. (GILD); and Wells Fargo & Co. (WFC), 2.83%. Because the fund pursues an equal-weighting strategy, all 40 companies impact its performance roughly equally, though there can be some variation because the fund is rebalanced on a staggered quarterly basis.

For investors wo are interested in the strategy of investing in companies that are difficult to compete against, VanEck Morningstar Wide Moat ETF (MOAT) provides a diverse collection of 40 stocks based around that exact thesis.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.