Investors who are seeking overseas exposure can take a look at exchange traded funds that track quality stocks with competitive economic advantages.
On the upcoming webcast, Improve International Stock Selection, Brandon Rakszawski, Product Manager at Van Eck Global, Dan Lefkovitz, Content Strategist for Indexes at Morningstar, and Michael Hodel, Technology Strategist at Morningstar, help explain how investing in companies with wide economic moats may help augment a portfolio.
For instance, the relatively new Market Vectors Morningstar International Moat ETF (NYSEArca: MOTI) expands on the popular Market Vectors Morningstar Wide Moat ETF (NYSEArca: MOAT), which has gathered $770 million in assets under management.
MOTI tries to reflect the performance of the Morningstar Global ex-US Moat Focus index, which includes 50 attractively priced companies outside the U.S. with sustainable competitive advantages.
Like its U.S.-focused counterpart, MOTI uses Morningstar’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.
Specifically, wide moat companies are those that Morningstar believes will maintain its competitive advantage for at least 20 years. The index utilizes a momentum screen to exclude 20% of the wide and narrow moat stocks in the parent Index with the worst 12-month momentum. Additionally, the 50 companies included in the index are selected based on the ratio of the issuer’s common stock price to the estimated fair value.
Unlike MOAT, MOTI focuses on international companies. Current top components include Unilever 2.3%, Kering 2.2%, Sigma Pharmaceuticals 2.2%, Bank of Montreal 2.2%, Capitaland 2.2%, China State Construction International 2.2%, Platinum Asset Management 2.1%, Itc 2.1%, Canadian Imperial Bank of Commerce 2.1% and Power Corp of Canada 2.1%.
However, potential investors should be aware that MOTI is heavy on the financial sector at a 60.6% tilt, followed by industrials 10.0%, materials 7.3%, consumer staples 6.4%, consumer discretionary 6.1%, utilities 3.9%, health care 2.2%, energy 2.0% and telecom 1.7%.
Country weights include China 16.2%, Australia 14.4%, Canada 14.1%, U.K. 11.8%, Singapore 10.3%, France 10.0%, India 6.3%, Spain 3.9%, Switzerland 3.8%, Netherlands 2.1%, Italy 2.0%, Mexico 2.0%, Sweden 1.8% and Luxembourg 1.7%.
Financial advisors who are interested in learning more about investing in international markets can register for the Tuesday, November 17 webcast here.