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  • Moat Investing

    Moativated Investing – A History of Outperformance

    Van Eck Global
    October 23, 2016

    Moativated Investing – A History of Outperformance

    Long-term outperformance defines the track record of Morningstar's success in identifying quality "moat" companies with sustainable competitive advantages that are also trading at attractive valuations. Since its live inception in 2007, the Morningstar® Wide Moat Focus IndexSM has outperformed the S&P 500® Index by more than four percentage points each year, as shown in the chart below.

    Morningstar's Economic Moat Rating

    Morningstar first began rating companies in 2002 according to the strength and longevity of their competitive advantages. Nearly fifteen years later, Morningstar's equity research process remains rooted in the core belief that quality companies positioned to maintain one or more competitive advantages well into the future are best positioned for long-term success. The quality of these companies is reflected in Morningstar's Economic Moat Rating.

    Morningstar's unique Economic Moat Rating system helps investors identify how likely a company is to keep competitors at bay for an extended period. The highest rating, a wide economic moat, signifies Morningstar's belief that the company can sustain its competitive advantage for at least 20 years into the future, which is no small feat in today's ultra-competitive environment.

    Fair Value Represents a Company's Long-Term Intrinsic Value

    Another key component to Morningstar's moat-investing equity research approach is its valuation process. Morningstar equity analysts assign a fair value estimate to each company based on how much cash it believes the company may generate in the future. The fair value represents a company's long-term intrinsic value. Of course, stocks may trade above or below the company's underlying fair value. The key is to identify those companies that are attractively priced at the time of investment.

    VanEck VectorsTM Morningstar Wide Moat ETF (MOAT) is the only U.S. ETF that seeks to track the Morningstar® Wide Moat Focus IndexSM (the "Index"), a benchmark that combines Morningstar's measure of quality with their valuation framework. The Index's approach to identifying U.S. companies with wide economic moats that are attractively priced has resulted in long-term outperformance versus the broader U.S. equity market, and provided a unique way for investors to invest in quality companies.

    U.S. Moat Investing Has Provided a Long-Term Performance Advantage
    Cumulative Index Returns 2/14/2007 to 9/30/2016

    Source: Morningstar; FactSet.
    Index performance is not representative of Fund performance. Fund performance current to the most recent month-end can be found at Past performance is no guarantee of future results. Effective June 20, 2016, Morningstar implemented several changes to the Morningstar Wide Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 20 stocks to at least 40 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover, and longer holding periods for index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.