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  • Moat Investing

    Communication Issues: Telecoms Lead Retreat

    Brandon Rakszawski ,Senior ETF Product Manager
    June 15, 2018
     

    For the Month Ending May 31, 2018

    Performance Overview

    International moats retreated in May, underperforming the broad international market. The Morningstar® Global ex-US Moat Focus IndexSM (MGEUMFUN, or "International Moat Index") trailed the MSCI All Country World Index ex-USA in May by roughly 1% (-3.33% vs. -2.31%, respectively). Domestic moat companies, as represented by the Morningstar® Wide Moat Focus IndexSM (MWMFTR, or "U.S. Moat Index"), lagged the S&P 500® Index (1.25% vs. 2.41%, respectively).

    International Moats: Failure to Communicate

    Telecommunication services companies weighed heavily on the International Moat Index. Telecom Italia (TIT IM, -18.85%) and America Movil (AMXL MM, -15.96%) were two of the Index’s five worst performers in May. Telecom Italia was affected by weaker than expected margins as part of their quarterly earnings results and suffered from the sell-off in the Italian market following debt fears. Samsonite International SA (1910 HK, -24.40%) led negative performers in the Index after accusations of accounting transgressions by activist investors Blue Orca sparked controversy that led to Samsonite’s CEO stepping down. Morningstar analysts believe the firm has properly addressed the accusations and have maintained their fair value estimate for the company.

    U.S. Domestic Moats: Health Check

    The healthcare sector reversed its fortunes from April to become the Index’s leading detractor in May. Cardinal Health (CAH US, -18.83%), CVS Health Corp. (CVS US, -9.22%), McKesson Corp. (MCK US, -8.92%), and AmerisourceBergen Corp. (ABC US, -8.91%) were all among the bottom performing companies in the Index. On the flip side, several companies stood out in May. Microchip Technology Inc. (MCHP US, +16.86%) revised higher revenue and earnings guidance following the closing of its acquisition of Microsemi. Lowe’s Companies Inc. (LOW US, +15.26%) finally began to see its spring customer traffic increase following a cold start to the season, and Morningstar raised its fair value estimate from $90 per share to $94. The U.S. Moat Index’s only energy company, Cheniere Energy Inc. (LNG US, +14.55%), continues to be well positioned in the current liquefied natural gas environment, performing well in May.

     

    (%) Month Ending 5/31/18

    Domestic Equity Markets

    International Equity Markets

    (%) As of 5/31/18

    Domestic Equity Markets

    International Equity Markets

    (%) Month Ending 5/31/18

    Morningstar
    Wide Moat Focus Index (MWMFTR)

    Top 5 Index Performers
    Constituent Total Return
    Microchip Technology Inc 16.86
    Lowe's Companies Inc 15.26
    Cheniere Energy Inc 14.55
    Veeva Systems Inc Class A 10.31
    Guidewire Software Inc 9.71

    Bottom 5 Index Performers
    Constituent Total Return
    Cardinal Health Inc -18.83
    Campbell Soup Co -17.51
    CVS Health Corp -9.22
    McKesson Corp -8.92
    AmerisourceBergen Corp -8.91

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

    Morningstar
    Global ex-US Moat Focus Index (MGEUMFUN)

    Top 5 Index Performers
    Constituent Total Return
    Nutrien Ltd 10.93
    Unicharm Corp 10.74
    Beijing Enterprises Holdings Ltd 9.80
    Hoshizaki Corp 8.24
    Kao Corp 8.24

    Bottom 5 Index Performers
    Constituent Total Return
    Samsonite International SA -24.40
    Telecom Italia SpA -18.85
    Grupo Aeroportuario del Pacifico SAB de CV Class B -18.02
    Banco Bilbao Vizcaya Argentaria SA -16.18
    America Movil SAB de CV Class L -15.96

    View MOTI's current constituents

    As of 3/16/18

    Morningstar
    Wide Moat Focus Index (MWMFTR)

    Index Additions
    Added Constituent Ticker
    McDonald's Corp MCD US
    Procter & Gamble PG US
    General Mills Inc GIS US
    Dominion Energy Inc D US
    Campbell Soup Co CPB US
    Hershey Foods Corp HSY US
    Cheniere Energy Inc LNG US
    Microchip Technology Inc MCHP US
    Comcast Corp A CMCSA US
    Franklin Resources Inc BEN US
    PepsiCo Inc PEP US

    Index Deletions
    Deleted Constituent Ticker
    Visa Inc A V US
    VF Corp VFC US
    Polaris Inds Inc PII US
    The Bank of New York Mellon Corp BK US
    Veeva Systems Inc A VEEV US
    United Technologies Corp UTX US
    TransDigm Group TDG US
    CBRE Group Inc. CBG US
    Bristol-Myers Squibb BMY US
    Emerson Electric Co EMR US
    Patterson Cos Inc PDCO US

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

    Morningstar
    Global ex-US Moat Focus Index (MGEUMFUN)

    Index Additions
    Added Constituent Country
    Beijing Enterprises Holdings Ltd. China
    LINE Corp Japan
    GEA AG Germany
    Unilever United Kingdom
    Vodafone Group United Kingdom
    Grupo Aeroportuario del Pacifico, Mexico
    Sun Hung Kai Properties Ltd. Hong Kong
    KION Group AG Germany
    SK Telecom Co Ltd South Korea
    Genting Singapore Plc Singapore
    Koninklijke KPN NV Netherlands
    Beijing Capital International Airport Co. Ltd. China
    Brambles Industries Ltd Australia
    Banco Bilbao Vizcaya Argentaria SA Spain
    Rolls-Royce Holdings Plc United Kingdom
    CapitaLand Mall Trust REIT Singapore
    Uni Charm Corp Japan
    Capitaland Ltd Singapore
    Symrise AG Germany
    Svenska Handelsbanken A Sweden
    LafargeHolcim Ltd Switzerland
    Hong Kong Land Hldgs Ltd China
    Smiths Group United Kingdom
    Grifols SA Spain
    Seven & I Holdings Co Ltd Japan
    Kubota Corp Japan

    Index Deletions
    Deleted Constituent Country
    Cameco Corp Canada
    Canadian Pacific Railway Ltd Canada
    Enbridge Inc Canada
    Cemex SA CPO Mexico
    America Movil SAB de CV L Mexico
    Embraer S.A. Brazil
    Airbus SE France
    Sanofi-Aventis France
    Luxottica Group SpA Italy
    Crown Resorts Ltd Australia
    Sonic Healthcare Ltd Australia
    Westpac Banking Corp Australia
    AMP Ltd Australia
    Commonwealth Bank Australia Australia
    QBE Insurance Group Ltd Australia
    Magellan Financial Group Limited Australia
    Inditex SA Spain
    Telefonica SA Spain
    MGM China Holdings Ltd Hong Kong
    Roche Hldgs AG Ptg Genus Switzerland
    Elekta B Sweden
    Sina Corp (Caymans) China
    ENN Energy Holdings Ltd China
    DBS Group Holdings Singapore
    Overseas-Chinese Banking Singapore
    KBC Group NV Belgium

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