Stocks with the wide moat designation have multiple tangible long-term benefits for investors, and those perks aren’t confined to U.S. borders.
Fortunately for market participants, some exchange traded funds offer exposure to ex-U.S. wide moat names, while other funds combine domestic and foreign wide moat fare. The VanEck Morningstar Global Wide Moat ETF (CBOE:MOTG) is in the latter category.
Alone, a global approach to wide moat stocks could be compelling for investors wanting to elevate their portfolios’ quality leanings, but there’s more to the MOTG story. MOTG, which tracks the Morningstar® Global Wide Moat Focus Index, is home to some familiar names that are currently undervalued. Add to that, some of those names are ideal for rocky market environments, indicating that MOTG is a relevant near-term consideration, too.
“During uncertain times, investors may want to own companies that offer some sense of certainty in terms of cash flows and company fundamentals,” wrote Morningstar’s Susan Dziubinski. “That’s where Morningstar’s Best Companies to Own list comes in. The companies that make up this list—126 in total—have significant competitive advantages, and we think those advantages are stable or growing. We believe the best companies have predictable cash flows and are run by management teams that have a history of making smart capital-allocation decisions.”
Some food and beverage names currently fit the bill as quality, undervalued stocks with wide moat benefits, including adult beverage giant Anheuser-Busch Inbev Sa/Nv, which is one of MOTG’s 71 holdings and commands a weight of about 1% in the ETF.
“The company has a history of buying brands with promising growth platforms and then expanding distribution while ruthlessly squeezing costs from the businesses, which contributes to the company’s Exemplary Morningstar Capital Allocation Rating,” noted Dziubinski. “We think the market has underappreciated AB InBev stock for a long while: The stock trades 41% below our fair value estimate of $90.”
Taiwan Semiconductor Manufacturing (NYSE:TSM) is also on the Morningstar list of undervalued wide moat names. That company operates the world’s largest semiconductor foundry, putting it front and center in geopolitical conversations and the evaluation of the broader chip investment thesis. The shares account for 1.78% of MOTG’s portfolio.
Dziubinski also highlighted Masco (NYSE:MAS) and credit ratings firm TransUnion (NYSE:TU), both of which are MOTG member firms, as undervalued names worthy of consideration today.
“TransUnion had a tough second quarter, and the firm lowered its revenue target for the rest of 2022. That being said, TransUnion’s data is critical to the underwriting decisions of its customers, and the barriers to entry are high,” Dziubinski added.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
