The Market Vectors Wide Moat ETF (NYSEArca: MOAT) has proven sturdy this year even as U.S. stocks have seesawed, again underscoring the advantages of investing in companies with deep competitive moats.
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]
“Morningstar has taken the concept and built it into an index tracked by the MOAT ETF. As Morningstar sees it, companies with wide moats are more valuable, have more durable excess returns on capital, are more resilient and often have shares prices that are underappreciated, which creates investment opportunity,” writes Roger Nusbaum for TheStreet.
“The index underlying the funds is constructed by equal weighting the 20 stocks that fare well in a valuation screening and also have a high wide moat rating from Morningstar’s analyst team. The index is rebalanced quarterly,” notes Nusbaum.
Up 1.3% this year, MOAT applies and equal weight methodology to its 21 holdings. Familiar names in that group include Oracle (NYSE: ORCL), eBay (NasdaqGM: EBAY), Buffett’s own Berkshire Hathaway (NYSE: BRK-B) and two of Berkshire’s largest equity holdings: IBM (NYSE: IBM) and Coca-Cola (NYSE: KO).