Moat Index Sees Tech Uptick and Consumer Goods Opportunities

The Morningstar^® Wide Moat Focus Index^SM (the “Moat Index” or “Index”) underwent its quarterly review on June 20, 2025. The Index systematically targets attractively priced, high quality U.S. companies each quarter, as identified by Morningstar’s equity research analysts. Below are a few highlights from the latest review. The full results are available here:

Moat Index Review Takeaways:

• Tech Weight Increases, Despite Removals

  The Moat Index locked in gains from several strong performing tech names over the quarter including Microchip Technologies. However, several additions to the sub-portfolio under review (Applied Materials, Salesforce, and Workday) paired with deletions across other sectors resulted in a modest increase in the Index’s tech sector weight. At approximately 5% underweight compared to the S&P 500 Index, the tech sector is now at the lowest underweight in some time. The exposure within tech does vary from the broader market, with a focus on undervalued application software and semiconductor companies.

• Consumer Goods Enter

  A handful of consumer goods companies were added to the sub-portfolio under review following a choppy quarter. Global tariff uncertainty and macro headwinds put pressure on several wide moat companies, presenting a potential opportunity amidst the uncertainty. Additions in June include PepsiCo, Clorox Company, and The Hershey Company.

• Valuation Focus Drives Value Posture

  Despite the tech additions discussed above, value remains the notable overweight relative to the broad market. Growth accounts for the majority of underweight, with modest underweight to core/blend stocks. This trend has been in place for the better part of the last year and a half as U.S. equity markets have appreciated consistently, despite periods of short-term volatility. The Moat Index’s price-to-fair value was reduced modestly to 0.80 following the review, implying a 20% discount to fair value. This stands in stark contrast to the S&P 500 Index which is currently fairly value (1.0).

2Q 2025 Moat Index Review Results

Moat Index Sector Shifts Following 2Q 2025 Review

Moat Index Sector Exposure Relative to S&P 500 Index

Moat Index Style Exposure Relative to S&P 500 Index: Value Bias Persists

Source: Morningstar. As of 6/20/2025 unless otherwise noted.