With lingering concerns over the Eurozone, a post-Brexit world and growth in China, investors seeking international exposure should turn to exchange traded funds that target strongly positioned companies.
On the upcoming webcast, ETF Strategy to Access Morningstar’s Top International Picks, Dan Lefkovitz Content Strategist for Indexes Morningstar, Alex Morozov, Director of European Equity Research at Morningstar, and Brandon Rakszawski Product Manager for VanEck, discuss firms with sustainable competitive advantages, or so-called economic moats, and attractive valuations.
For instance, the VanEck Vectors Morningstar International Moat ETF (NYSEArca: MOTI) tracks 50 quality international names, targeting the most attractively priced companies and those with a wide economic moat.
Morningstar’s underlying indexing methodology has helped the ETF strategy outperform the broader markets with lower volatility. The Morningstar’s moat philosophy tries to identify companies with structural competitive advantages that could help investors earn above-average returns on capital over a long period of time.
Related: Find Value with Wide Moat ETFs
The Morningstar Moat Focus Indices target companies with a wide economic moat or sustainable competitive advantages and focuses on the most undervalued moat stocks, which have helped generate significant excess returns relative to the overall market.
According to Morningstar’s indexing methodology, there are five sources of economic moats: Intangible assets that include brand recognition to charge premium prices. Switching costs that make it too expensive to stop using a company’s products.
[related_stories]MOTI’s top country weights include a heavy tilt toward Australia at 16.3% of the fund’s portfolio, followed by France 11.8%, Singapore 10.8%, Canada 9.8%, the U.K. 8.7% and the U.S. 8.1%.
Additionally, the international moat ETF has a large 47.2% position in financials, along with 20.1% consumer discretionary, 8.5% health care, 6.0% industrials, 4.2% materials, 4.1% information tech, 3.9% consumer staples, 3.9% energy and 2.1% telecom.
Related: 10 ETFs Hit the Hardest in ‘Brexit’ Fallout
In contrast, the benchmark MSCI EAFE Index has a large 23% tilt toward Japan and 19.2% U.K. Two troubled areas in the developed markets this year. Japan has been suffering from a strengthening yen currency and slowing economic growth. Meanwhile, the Brexit referendum has kept a lid on the United Kingdom’s growth prospects.
Financial advisors who are interested in learning more about Morningstar’s international investment strategy can register for the Thursday, July 21 webcast here.