Over the years, scores of investors have worshipped at the altar of Warren Buffett who has ardently preached the virtues of investing in companies with sustainable and wide competitive moats.
Knowing the reverence for him Buffett’s followers have and, more importantly, his long-term track record, help explain the ongoing success of the Market Vectors Wide Moat ETF (NYSEArca: MOAT). MOAT is up 7% this year and touched a new all-time high earlier Friday.
MOAT currently holds 21 stocks on an equal-weight basis. In addition to owning shares of Buffett’s Berkshire Hathaway (NYSE: BRK-B), MOAT holds several stocks found in Berkshire’s equity portfolio, including Coca-Cola (NYSE: KO), General Electric (NYSE: GE), National Oilwell Varco (NYSE: NOV) and Procter & Gamble (NYSE: PG).
MOAT frequently makes anywhere from four to nine additions and deletions to its portfolio at each quarterly rebalance. The ETF tracks an index that Morningstar says the index uses the firm’s proprietary methodology to identify companies with long-term, advantages, which allows companies to earn sustainable excess economic profits, as measured by the return on invested capital relative to the company’s cost of capital. [Morningstar ‘Wide Moat’ ETF Covers Firms with a Competitive Edge]
MOAT has also benefited from this year’s value rotation that previously received so much attention. The ETF’s sector lineup underscores its utility as a legitimate value offering as two value sectors – energy and industrials – combine for 35.8% of MOAT’s weight. Consumer staples is MOAT’s largest sector allocation at 20.4%, according to Market Vectors data.
That is not to say MOAT lacks the flexibility to adapt to growth stocks being in favor. The ETF currently holds a stake in eBay (NasdaqGS: EBAY) and has previously owned Amazon (NasdaqGS: AMZN) and Facebook (NasdaqGS: FB) among other growth stocks.
MOAT’s methodology has clearly been embraced by investors. The ETF has raced to $742.3 million in assets under management in just 26 months on the market and that $742.3 million indicates growth of over 42% since January when MOAT topped $500 million in assets. [Wide Moat ETF tops $500M in Assets]
Market Vectors Wide Moat ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Coca-Cola, Amazon, Facebook, Procter & Gamble and MOAT.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.