Why Seek Out 'Moats' in Your Value Investing Strategy?

As value continues to outdo growth when it comes to capturing investor interest, many advisors are considering funds like the VanEck Vectors Morningstar Wide Moat ETF (MOAT).

Fundamental analysis involves finding value among companies that have a competitive advantage in their respective marketplace, which is where the MOAT strategy shines. MOAT does all the value-finding work through the convenience of an ETF wrapper.

MOAT seeks to replicate as closely as possible the price and yield performance of the Morningstar® Wide Moat Focus Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index.

The index is comprised of securities issued by companies that Morningstar determines to have sustainable competitive advantages based on a proprietary methodology that considers quantitative and qualitative factors.

Overall, MOAT provides exposure to:

  • Wide Moat Companies: A focus on U.S. companies Morningstar believes possess sustainable competitive advantages, or “moats.”
  • A Focus on Valuations: Index targets companies trading at attractive prices relative to Morningstar’s estimate of fair value.
  • Morningstar’s Equity Research: Index fueled by Morningstar’s forward-looking, rigorous equity research process driven by over 100 analysts globally.


A Step Ahead of the S&P 500 Value Index

The ETF has been one step ahead of the S&P 500 Value Index, outperforming it by over 4% the past year.

“When you’re looking at the stock market, two of the simplest ways to slice up the universe of investments out there is to divide them into growth versus value,” a U.S. News report said. “Growth stocks tend to be expanding operations and worrying about increases in revenue and customers, sometimes forgoing tangible profits in order to invest in the future.”

“Meanwhile, value stocks tend to be stable and throw off reliable cash – even if they are sometimes mature or downright stagnant businesses that might not ever get much bigger,” the report said further. “While growth gets a lot of attention as investors chase dynamic tech companies, value investing is a crucial part of any portfolio because these stocks are built on strong foundations. If you are looking to bias your investments toward value right now, here are seven exchange-traded funds worth a look.”

MOAT Chart

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