“Strong stock selection benefited the U.S. Moat Index in 2016 and led to its strongest calendar year of outperformance compared to the S&P 500 Index since 2009,” according to a VanEck note. “The performance gap first began to widen in February and then increased throughout the remainder of the year.”

Contributing to the outperformance in the MOAT strategy, increased merger and acquisition activity played a significant role among several constituents. For instance, Microsoft (NasdaqGS: MSFT) acquisition of LinkedIn (NasdaqGS: LNKD) helped made LinkedIn the strongest performing component of the Moat Index.

Outstanding performances in the information technology, consumer discretionary, industrials and financials sectors helped MOAT outperform the broader market. MOAT includes a hefty 30.5% tilt toward healthcare, along with 21.3% consumer discretionary, 13.1% industrials, 11.8% financials, 9.6% information technology, 5.0% materials, 4.9% real estate and 3.8% consumer staples.

MOAT frequently makes shifts from four to nine additions and deletions to its portfolio at each quarterly rebalance, which may help the fund shift away from pricier options, such as those that have recently capitalized on M&A activity. The ETF tracks an index that uses Morningstar 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. This helps provide a portfolio of high quality companies trading at a discount to intrinsic value.

Current top holdings include Twenty-First Century Fox (NasdaqGS: FOXA) 2.7%, Walt Disney (NYSE: DIS) 2.6%, Bristol-Myers Squibb (NYSE: BMY) 2.6%, American Express (NYSE: AXP) 2.6% and Compass Minerals International (NYSE: CMP) 2.6%.