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  • Moat Investing

    Moats Open 2018 in Strong Position

    Brandon Rakszawski, Senior ETF Product Manager
    February 08, 2018

    For the Month Ending January 31, 2018

    Performance Overview

    International and U.S. moats started 2018 on a strong note, continuing progress from last year. International moats, as represented by the Morningstar® Global ex-US Moat Focus IndexSM (MGEUMFUN, or "International Moat Index"), led the MSCI All Country World Index ex-USA in January (5.91% vs. 5.57%, respectively). The U.S.-oriented Morningstar® Wide Moat Focus IndexSM (MWMFTR, or "U.S. Moat Index") outperformed the broad U.S. markets as represented by the S&P 500® Index (6.17% vs. 5.73%, respectively).

    International Moats: New Name, Big Impact

    GKN Plc (GKN LN, +39.15%), a narrow moat rated firm in the U.K. that supplies automotive and aircraft manufacturers, was the standout constituent for the month after being added to the International Moat Index in December. A hostile takeover bid for GKN by Melrose Industries Plc in January helped push its shares higher. China was by far the top contributing country to returns, with Bank of China Ltd. (3988 HK, +22.59%) leading the pack in the strong performing financial sector within the International Moat Index. Switzerland and Canada were the only countries to detract, although China-based gas utility, China Resources Gas Group Ltd. (1193 HK, -9.22%), was the worst performing constituent in the Index. Canadian energy company Enbridge Inc. (ENB CN, -6.45%) also struggled under price pressure driven primarily by investor concerns over its ability to maintain its attractive dividend in the face of growth obstacles.

    U.S. Domestic Moats: Amazing Amazon

    Amazon was the top performing constituent in the U.S. Moat Index for January, and its quarterly results triggered an upward fair value revision from $1,250 per share to $1,600 by Morningstar equity analysts at the beginning of February. Meanwhile, Amazon, Berkshire Hathaway, and J.P. Morgan sent shockwaves through the healthcare sector, which has had a large weight in the Index for several quarters, when they announced their joint healthcare effort at the end of the month. Despite the announcement, healthcare was the strongest contributor to U.S. Moat Index returns in January. No single sector detracted from returns for the period, but a few companies did struggle, such as L Brands Inc. (LB US, -16.82%). The retailer has seen its share price whipsaw over the past year, but Morningstar has maintained its wide moat rating and current $69 fair value estimate.


    (%) Month Ending 1/31/18

    Domestic Equity Markets

    International Equity Markets

    (%) As of 1/31/18

    Domestic Equity Markets

    International Equity Markets

    (%) Month Ending 1/31/18

    Wide Moat Focus Index (MWMFTR)

    Top 5 Index Performers
    Constituent Total Return Inc 24.06
    Cardinal Health Inc 18.05
    Gilead Sciences Inc 16.97
    TransDigm Group Inc 15.40
    Veeva Systems Inc Class A 13.71

    Bottom 5 Index Performers
    Constituent Total Return
    L Brands Inc -16.82
    Polaris Industries Inc -8.86
    General Electric Co -7.34
    John Wiley & Sons Inc Class A -3.57
    Eli Lilly and Co -3.56

    View MOAT's current constituents
    View MWMZX's current constituents

    Global ex-US Moat Focus Index (MGEUMFUN)

    Top 5 Index Performers
    Constituent Total Return
    GKN PLC 39.15
    Bank Of China Ltd H 22.59
    Industrial And Commercial
    Bank Of China Ltd H
    SINA Corp 16.89
    Elekta AB B 15.76

    Bottom 5 Index Performers
    Constituent Total Return
    China Resources Gas Group Ltd -9.22
    Enbridge Inc -6.45
    Samsonite International SA -5.62
    TransCanada Corp -5.47
    Roche Holding AG Dividend Right Cert. -2.42

    View MOTI's current constituents

    As of 12/15/17

    Wide Moat Focus Index (MWMFTR)

    Index Additions
    Added Constituent Ticker
    Cardinal Health Inc CAH US
    Veeva Systems Inc A VEEV US
    Merck & Co Inc MRK US
    Western Union Co WU US
    Microchip Technology Inc MCHP US

    Index Deletions
    Deleted Constituent Ticker
    Berkshire Hathaway BRK/B US
    BlackRock Inc BLK US
    CH Robinson Worldwide Inc CHRW US
    Patterson Cos Inc PDCO US
    Polaris Inds Inc PII US
    T Rowe Price Group Inc TROW US

    View Latest MOAT Reconstitution Report
    View MOAT's list of current constituents

    Global ex-US Moat Focus Index (MGEUMFUN)

    Index Additions
    Added Constituent Country
    Telecom Italia SpA Italy
    Lloyds Banking Group Plc United Kingdom
    SoftBank Group Corp Japan
    Beijing Enterprises Holdings Ltd. China
    Millicom Intl Cellular S.A. - SDR Sweden
    Bank of China Ltd H Shares China
    Nordea AB Sweden
    Gas Natural SDG SA Spain
    Bayer AG Germany
    Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. Mexico
    Smiths Group United Kingdom
    GKN United Kingdom
    Swedbank AB Sweden
    TransCanada Corp Canada
    KDDI Corp Japan
    GEA AG Germany
    Danske Bank A/S Denmark
    Samsonite International SA Hong Kong
    Contact Energy Ltd New Zealand
    Vodafone Group United Kingdom
    Siemens AG Germany
    Grupo Aeroportuario del Pacifico, S.A.B. de C.V. Mexico
    Infosys Ltd India

    Index Deletions
    Deleted Constituent Country
    Cemex SA CPO Mexico
    Symrise AG Germany
    HeidelbergCement AG Germany
    China Telecom Corporation Ltd. - H Shares China
    ENN Energy Holdings Ltd China
    Nippon Tel & Tel Corp Japan
    Nidec Corp Japan
    Murata Manufacturing Co Ltd Japan
    Telefonica Brasil S.A. - Prf Brazil
    GlaxoSmithKline United Kingdom
    Ansell Ltd Australia
    CSL Ltd Australia
    QBE Insurance Group Ltd Australia
    Novartis AG Switzerland
    Julius Baer Group Switzerland
    Elekta B Switzerland
    Danone France
    Safran SA France
    Bureau Veritas SA France
    Tata Motors Ltd India
    DBS Group Holdings Singapore
    CapitalLand Commercial Trust Singapore

    View Latest MOTI Reconstitution Report
    View MOTI's list of current constituents