Compared to their more glamorous growth counterparts, value stocks remain out of fashion, but that doesn’t mean value strategies are delivering sour returns. In fact, the S&P 500 Value Index is higher on a YTD basis. Some ETFs with value tendencies are also positive on the year, including the VanEck Morningstar Wide Moat ETF (MOAT). It isn’t a dedicated value fund, but its underlying index attempts to identify wide moat stocks trading at attractive multiples.
That search can unearth both growth and value names, but MOAT’s current 56-stock roster leans more into value. In other words, MOAT probably won’t be hitting home runs over the near term. But the ETF’s propensity for consistently hitting singles and doubles over the long term could be appealing to a broad swath of investors, particularly those with long time horizons. Additionally, some of the stocks that currently rank as the “best” value names reside in MOAT.
MOAT Roster Primed for Value Resurgence
With growth stocks extending a wide lead over value fare, it’s key that investors willing to embrace the latter emphasize quality. There’s fluidity in quality, but MOAT solves for some of that lumpiness, making for an efficient quality/value combination.
The benefit in MOAT’s methodology is that it can deliver to investors broad-based exposure a variety of high -quality stocks trading at deep discounts and do so in sector-agnostic fashion. Take the case of pharma giant Pfizer (PFE) – a high-quality name that’s battered and bruised.
“Pfizer, which is trading at a 33% discount to our fair value estimate, is the first stock on our list from a sector that some may not associate with value: healthcare. But like many Big Pharma stocks, Pfizer lands in the value portion of the style box. We don’t think the market fully appreciates the pharmaceutical giant’s ability to offset major patent losses over the next five years,” noted Morningstar’s Margaret Giles.
Healthcare is MOAT’s largest sector weight. But as noted above, high-quality value offerings are available in all sectors, including financial services. MOAT holding US Bancorp fits that bill, as it trades 24% below Morningstar’s fair value estimate.
“We think its management team has done an exemplary job of allocating capital, Wong adds. Its latest strategy has been to focus on its payments ecosystem, expand its branch footprint, and pursue new acquisitions and partnerships,” added Giles.
Other MOAT holdings on the Morningstar list of best value stocks for the long-term are Gilead Sciences (GILD), Campbell Soup (CPB) and Comcast (CMCSA).
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