Stage Set for Moat Stocks After Strong 2025 Close

Key Takeaways:

• Moat Index gained 1.7% in December, led by strong stock selection in technology, industrials and consumer staples.
• Estée Lauder and Salesforce led Moat Index gains, driven by improving beauty demand and AI-related software momentum.
• SMID Moat Index rose 1.0%, outperforming broad small- and mid-cap benchmarks despite mixed sector trends.
• Norwegian Cruise Line and Carnival led the SMID Moat Index, as travel demand and onboard spending remained resilient.

U.S. equity markets closed out 2025 on steady footing, with minor gains masking notable dispersion beneath the surface. The S&P 500 finished the month just above flat, gaining 0.06%, as investor optimism around easing inflation and resilient economic data was balanced by year-end positioning and profit taking activity. Market leadership remained concentrated, though participation broadened modestly compared with earlier in the year. Sector performance was mixed, led by financials, with communication services and materials also among the stronger performers. Defensives like utilities and staples lagged, as investors favored more cyclical exposure into year-end.

Against this backdrop, the Morningstar Wide Moat Focus Index (the “Moat Index”) gained 1.7% in December, outperforming the S&P 500. Looking beyond the single month, the fourth quarter proved particularly strong for the Moat Index, which outperformed both the cap-weighted and equal-weighted S&P 500 amid improving market participation and a rotation away from the most crowded mega-cap trades. While the Index trailed the S&P 500 slightly on a full-year basis, this outcome reflects its equal-weighted, valuation-conscious approach and limited exposure to richly valued mega-cap technology. In a year characterized by narrow leadership and heavy concentration in the largest stocks, the Moat Index’s ability to remain competitive while offering differentiated exposure can be viewed as a relative strength.

Smaller-cap equities also posted gains during the month. The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) rose 1.0% in December, outperforming broad small- and mid-cap benchmarks. Full-year performance, however, reflected a more challenging environment for smaller-cap equities amid elevated interest rates and periodic pullbacks in risk appetite. Even so, the strategy’s emphasis on durable competitive advantages and attractive valuations helped it remain competitive throughout a volatile year.

Moat Stocks Close the Year on a Strong Note

Source: Morningstar. Data as of 12/31/2025. Past performance is no guarantee of future results. Index performance is not representative of fund performance. It is not possible to invest directly in an index. Please see index definitions and other important disclosures at the end of this content. Fund performance current to the most recent month end is available by visiting vaneck.com or by calling 800.826.2333.

Moat Index Welcomes Back Select Mag 7 Names at Quarterly Review

Both the Moat and SMID Moat Indexes underwent quarterly reviews on December 19, 2025. Each quarter, Morningstar’s equity research analysts systematically target the most attractively priced, high quality U.S. companies within their respective universes. At the December review, the Moat strategies took advantage of valuation opportunities that emerged amid year-end volatility, including renewed exposure to several mega-cap technology names trading at more attractive valuations. See our blog covering the recent review for additional context and key takeaways. Full results of the quarterly reviews are also available here: Moat Index and SMID Moat Index.

Moat Index Highlights: Beauty, Software and Defense Lead

In December, performance within the Moat Index was driven by strong stock selection across several sectors. While sector allocation detracted modestly, individual company performance more than offset these effects. Technology and industrial holdings featured prominently among the top contributors, reflecting investor preference for companies with visible earning power and durable competitive advantages.

The Estée Lauder Companies Inc. (EL) was the top contributor to Moat Index performance during the month, with shares rising approximately 11% in December. Shares advanced as investors responded positively to improving trends in premium beauty demand and continued progress on operational initiatives. Morningstar continues to view Estée Lauder’s portfolio of prestige brands, global scale and strong retail relationships as key drivers of its wide economic moat.

Salesforce Inc. (CRM) was also a leading contributor, gaining roughly 15% during December. The stock benefited from continued momentum in enterprise software demand and improving sentiment surrounding the company’s artificial intelligence offerings. Morningstar views Salesforce’s high switching costs and deeply embedded customer relationships as central to its wide moat rating. The company’s broad cloud portfolio and growing adoption of AI-driven tools continue to reinforce its strategic importance within customers’ core business operations.

Other top contributors within the Moat Index during the month included Boeing Co. (BA), a global aerospace and defense manufacturer, Huntington Ingalls Industries Inc. (HII), the largest independent U.S. military shipbuilder, and NXP Semiconductors NV (NXPI), a supplier of automotive and industrial semiconductors.

Companies detracting the most from Moat Index performance in December were concentrated within health care and consumer staples. Detractors included Agilent Technologies Inc. (A), a provider of life sciences and diagnostics tools; Zimmer Biomet Holdings Inc. (ZBH), a manufacturer of orthopedic implants; Amgen Inc. (AMGN), a biotechnology company; Clorox Co. (CLX), a consumer products manufacturer, and Brown-Forman Corp. (BF.B), a global spirits producer.

Moat Index Top Contributors and Detractors - December 2025

Contributors

Detractors

Source: Morningstar. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

SMID Moat Index Highlights: Travel Demand Drives Gains

The SMID Moat Index finished December higher, supported by strong contributions from consumer discretionary holdings. Stock selection was the primary driver of performance, while sector allocation detracted modestly. Travel-related companies featured prominently among the top contributors, reflecting continued interest in leisure and travel-related spending.

Norwegian Cruise Line Holdings Ltd. (NCLH) and Carnival Corp. (CCL) together led SMID Moat Index performance in December, as shares rose approximately 21% and 18%, respectively. Both companies benefited from continued strength in global leisure travel demand, firm pricing and resilient onboard spending trends. Norwegian operates a global cruise portfolio across multiple brands, while Carnival is the world’s largest cruise operator, serving a broad customer base through a diversified fleet. The strong performance of both stocks reflected ongoing investor confidence in the cruise industry’s recovery and cash flow generation.

Expedia Group Inc. (EXPE) was the third-largest contributor and rose roughly 11% during December. Expedia operates a leading global online travel platform that connects consumers with lodging, air travel, and destination services. The stock’s performance reflected steady travel demand and investor confidence in the company’s scaled marketplace and brand portfolio. Other top contributors within the SMID Moat Index included Huntington Ingalls Industries Inc. (HII), a U.S. defense shipbuilder, and Warner Music Group Corp. (WMG), a multinational music entertainment company.

Companies detracting the most from SMID Moat Index performance during the month spanned several sectors. These included Lamb Weston Holdings Inc. (LW), a major U.S. food processing company; Agilent Technologies Inc. (A), a life sciences tools provider; WESCO International Inc. (WCC), an electrical and industrial distribution company; Ionis Pharmaceuticals Inc. (IONS), a biotechnology firm focused on RNA-targeted therapies, and Mattel Inc. (MAT), a global toy manufacturer.

SMID Moat Index Top Contributors and Detractors - December 2025

Contributors

Detractors

Source: Morningstar. Past performance is no guarantee of future results. Index performance is not illustrative of fund performance. Not intended as a recommendation to buy or to sell any of the securities mentioned herein.

Choose Your Moat Strategy

VanEck’s suite of moat investing strategies is powered by Morningstar’s equity research team, which seeks quality companies trading at attractive valuations. The below ETFs offer access to US moat companies:

VanEck Morningstar Wide ETF (MOAT): companies with a wide moat rating, which means Morningstar believes the company is likely to sustain its competitive advantage for at least the next 20 years.

VanEck Morningstar SMID Moat ETF (SMOT): small and mid-cap moat companies.

VanEck Morningstar Wide Moat Value ETF (MVAL): wide moat companies within Morningstar’s value style category.