U.S. stocks posted their worst year in a decade after what was a rough 2018 for U.S. equities with the Dow losing 5.80 percent, while the S&P 500 shed 6.5 percent and the Nasdaq Composite down over 4 percent. A confluence of trade wars, rising interest rates and volatility helped to bring the markets down after an extended bull run that peaked during the summer, but despite the challenges near year’s end, the VanEck Vectors Morningstar Wide Moat ETF (NYSEArca: MOAT) gave investors the right exposure at just the right time.
The strategy avoided companies in a downtrodden tech sector that was further exacerbated at the close of 2018 as shares of Apple were getting downgraded by numerous analysts, causing many tech ETFs to suffer. However, it was MOAT that concentrated on more defensive sectors like healthcare or tech companies with sustainable business models while investors were awash in volatility starting in October.
“Morningstar’s unique forward-looking focus on companies with sustainable competitive advantages and attractive valuations gave the index an overweight to healthcare stocks while resulted in more selective exposure to sectors that, as a whole, were viewed as overvalued throughout the year,” wrote Brandon Rakszawski , Senior ETF Product Manager at VanEck.
The moat strategy itself “offers global exposure to Morningstar’s best ideas, which are really rooted in their equity research process of identifying quality companies – those companies with economic moats as Warren Buffett coined that term, but also identifying their attractiveness in terms of valuations, so making sure you’re not overpaying for those quality companies,” Rakszawsk told ETF Trends.