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  • Moat Investing

    Looking Back at a Strong Year of Looking Forward

    blog-etfs-author-details(Brandon Rakszawski),
    December 20, 2018
     

    For the Month Ending November 30, 2018

    Throughout 2018, the Morningstar® Wide Moat Focus IndexSM (MWMFTR, or "U.S. Moat Index") has offered differentiated exposure to U.S. stocks when compared to many common broad-based indices. 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.

    For example, Morningstar’s process identified Salesforce.com (CRM US) as an attractive wide moat tech company in June 2016 and has stuck with that position since. The company has performed positively over that time period, and Morningstar equity research analysts have raised their fair value estimate several times in the last few years, indicating their belief that the company remains attractively priced relative to their estimate of fair value. Recently, the firm posted solid third quarter results and raised its revenue and earnings outlook. Morningstar believes Salesforce.com’s moat is reinforced by switching costs—meaning its customers tend to be sticky because significant work and costs would be involved in switching to a competing client relationship management software. The U.S. Moat Index has been significantly underweight in the information technology sector this year, and after the late year sell-off in this sector, it will be interesting to see how the index allocates (or not) later this week at its December review based on current valuation opportunities.

    Several stocks in the U.S. Moat Index have underwhelmed in 2018, such as L Brands (LB US) and General Electric (GE US). Morningstar’s forward-looking process has identified and assessed these companies’ shortcomings, and the systematic index process has begun to replace these positions with more attractive companies.

    Ultimately, investors tend to judge an investment philosophy or strategy based on outcomes, and Morningstar’s forward-looking moat investment philosophy stands out in the crowd. Despite recent turmoil in the markets, the VanEck Vectors Morningstar Wide Moat ETF (MOAT®) is among the top performing ETFs and mutual funds in the Morningstar US Fund Large Blend Category across multiple periods through November 30, 2018. In fact, MOAT is ranked number one for the three-year period based on total return.

    Top Decile across the Board
    Based on total return as of November 30, 2018

    Chart of Top Decile across the Board

    MOAT Rankings Relative to Morningstar US Fund LargeBlend Category (Returns %)
    As of 9/30/2018
      YTD Peer group Rank Peer group percentile # of
    Investments Ranked
    1 Year Peer group Rank Peer group percentile # of
    Investments Ranked
    VanEck Vectors Morningstar Wide Moat ETF 8.77 30 3 1,412 10.53 12 2 1,402
    S&P 500 Index 5.11 6.27
     
      3 Years Peer group Rank Peer group percentile # of
    Investments Ranked
    5 Years Peer group Rank Peer group percentile # of
    Investments Ranked
    VanEck Vectors Morningstar Wide Moat ETF 16.27 1 1 1,207 12.14 12 2 1,068
    S&P 500 Index 12.16 11.12

    Source: Morningstar. Click here to view MOAT performance current to the most recent month-end.

    Performance data quoted represent past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect temporary contractual fee waivers and/or expense reimbursements. Had the ETFs incurred all expenses and fees, investment returns would have been reduced. Investment returns and ETF share values will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that dividends and capital gains distributions have been reinvested in the fund at NAV. The "Net Asset Value" (NAV) of a VanEck Vectors ETF is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF's intraday trading value. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.

    MOAT expenses: Gross 0.48% and Net 0.48%. Expenses AT are capped contractually at 0.49% until February 1, 2019. Cap excludes acquired fund fees and expenses, interest expense, trading expenses, taxes and extraordinary expenses.