When it comes to the combination of wide moat investing and exchange traded funds, the VanEck Morningstar Wide Moat ETF (MOAT) sets the standard.
MOAT turns 12 years old next week and now has $14.4 billion in assets under management as well as a lengthy track record of beating broader, old-guard equity benchmarks. Building on that success, VanEck recently added two more ETFs to its wide moat suite — the VanEck Morningstar Wide Moat Value ETF (MVAL) and the VanEck Morningstar Wide Moat Growth ETF (MGRO).
MGRO and MVAL take a page from the MOAT book in that both rookie ETFs seek to deliver exposure to attractively valued wide moat companies. The index methodologies followed by MGRO and MVAL are comparable to what’s employed by MOAT and the VanEck wide moat ETFs, but there are some differences, too.
“In MVAL, inputs into the style score include traditional value metrics such as a stock’s historical price-to-book and price-to-sales ratios. MGRO inputs include traditional growth metrics like historical earnings and sales growth. Both MVAL and MGRO also include a forward looking metric to determine the style score (price-to-projected earnings for MVAL and long-term projected earnings growth for MGRO),” according to VanEck.
MGRO, MVAL Bring Style to Wide Moat Investing
While MGRO and MVAL are likely to have some — if not high — overlap with MOAT, the new wide moat ETFs are, as the names imply, growth- and value-focused. Thus, over time, there will be some sector differences between the new funds and stablemate MOAT.
“Sector exposure will vary due to the active share associated with a concentrated portfolio as well as the impact of the moat and valuation screens,” added VanEck. “Both indices have dynamic index sector exposure, as companies doing business in various segments of the market have become more or less attractively priced. Historically, MGRO has had more consumer cyclical and technology sector exposure, while MVAL has had more healthcare and financial services exposure.”
The style dedication of the new ETFs is potentially advantageous for another reason. In the case of MGRO, it can often be difficult for investors to find attractively valued growth stocks, particularly those with wide moat traits.
MVAL could be beneficial to value investors, because by employing the wide moat overlay, the new ETF can potentially steer clear of value traps while providing market participants with exposure to quality value names.
“We believe the focused approach of MGRO and MVAL, which selectively identifies companies by considering competition and competitive advantages as well as valuations, may be a better choice,” concluded VanEck.
Both ETFs have annual expense ratios of 0.49%, or $49 on a $10,000 stake.
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