Wide Moat Stocks Defy September Slump

Key Risks
Equity-market risk; concentration in technology shares; small-/mid-cap volatility; currency fluctuations; integration of sustainability risks may result in certain investments being avoided or divested, which could limit diversification; index methodology risk. These factors can lead to significant losses, and past rallies may not be repeated. Complete information on all risks is available in the prospectus and in the KID/KIID, which can be accessed free of charge at vaneck.com.

Key Takeaways:

• Moat Index gains in September, thanks to tech names offsetting weakness in defensive sectors like consumer staples.
• Applied Materials and Oracle led Moat Index contributors.
• SMID Moat Index slipped 1%, with consumer discretionary detracting, while tech and health care provided support.

In September, U.S. equities shrugged off the month’s usual seasonal headwinds and pressed ahead with their rally, posting a fifth consecutive month of gains as the S&P 500 advanced 3.7% to notch another record high. Past performance does not predict future returns. Market momentum was supported by the Federal Reserve's first rate cut in nearly a year as well as strong consumer spending data and GDP growth estimates that exceeded expectations. However, in a departure from last month’s broad market breadth, where small- and mid-caps outperformed, leadership this month was more concentrated with mega-cap technology once again leading the way. The month ended with some concern around a possible government shutdown, as partisan gridlock in Congress led to a failed last-ditch funding bill and threats from the Trump administration to convert temporary furloughs into permanent mass layoffs, weighing on stocks and investor sentiment amid fears of broader fiscal disruptions.

The Morningstar Wide Moat Focus Index (the “Moat Index”) also bucked September seasonality to advance during the month. However, the strategy faced some resistance due to its equal-weight methodology (every stock in the index carries the same percentage weight regardless of its market value), resulting in lagging performance behind the top-heavy S&P 500. This same dynamic was also evident in the equal-weight variant of the S&P 500, which lagged by a similar degree.

Despite the supportive back drop of rate cuts, performance of smaller U.S. stocks was muted this month, with the broad small- and mid-cap benchmarks returning 1.0% and 0.5%, respectively. The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) faced some additional pressure during the month due a handful of consumer discretionary names, but remains in line with benchmarks year-to-date.

Stocks Buck Seasonal September Slump

Source: Morningstar. Data as of 30/09/2025. Past performance is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. 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.

Moat Index Highlights: AI & Data Center Infrastructure Lead

In September, the Moat Index faced headwinds caused by its equal-weighted approach and current overweight positioning in defensive sectors, particularly within consumer staples and health care. However, these were partly offset by security selection in a handful of technology names, as the cohort is heavily represented in the top contributors during the month.

Applied Materials (AMAT), a leading supplier of semiconductor wafer fabrication equipment, was the top contributor in September, surging more than 25%. The rally followed a reassessment of AI-driven capital spending across the semiconductor ecosystem, with Morningstar boosting its medium-term outlook for wafer fab equipment and advanced packaging. Morningstar highlights AMAT’s wide moat, anchored by its unmatched breadth across deposition, etch, and process control, deep integration with customer workflows, and a market-leading $3 billion annual R&D budget that reinforces sticky, long-dated relationships. Morningstar raised its fair value estimate to $200 per share, and while it now views AMAT as fairly valued after the move, it still prefers AMAT over peers given its leadership in advanced packaging and exposure to growing demand for advanced logic and memory tied to AI.

Oracle (ORCL), a leader in enterprise software and cloud infrastructure, was also among September’s top contributors, rallying sharply on a strong quarterly update. Morningstar notes that surging AI data center demand and deepening partnerships with leading model providers materially improved the company’s multiyear outlook for Oracle Cloud Infrastructure (OCI). While the ramp requires heavy investment and may pressure near-term cash flows, Morningstar views OCI’s switching costs and the broader shift toward multi-cloud as supportive of durable growth. Morningstar raised its fair value estimate to $330 and sees additional upside if Oracle successfully converts its sizable bookings into revenue.

Other top contributors within the Moat Index during the month include the supplier of automated test equipment for semiconductors, Teradyne Inc. (TER); semiconductor wafer fabrication equipment manufacturer, Lam Research Corp. (LRCX); and internet search and content giant, Alphabet Inc. (GOOGL).

Companies detracting the most in September included the spirits and Mexican beer importer, Constellation Brands Inc. (STZ); electronic design automation software provider, Synopsys Inc. (SNPS); athletic footwear and apparel brand, Nike Inc. (NKE); consumer health company, Kenvue Inc. (KVUE); and aerospace and defense firm, Boeing Co. (BA).

Moat Index Top Contributors and Detractors - September 2025

Contributors

Detractors

Source: Morningstar. Investing is subject to risk, including the possible loss of principal. 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. Please note that the companies highlighted here are exposed to the same market, sector-concentration, and methodology risks as the overall Moat Index, which can result in significant losses.

SMID Moat Index Highlights: Positive Pharma Trial and AI Build Out

Smaller caps gained slightly during the month, but trailed their large-cap counterparts in a cooling from the strong price action seen in the small cap segment in August. The SMID Moat Index faced some additional headwinds from its overweight in consumer discretionary names, which underperformed in September. However, bright spots remained in technology and health care names.

Ionis Pharmaceuticals (IONS), a leader in RNA-targeted therapeutics, was one of those bright spots and the top contributor to the SMID Moat Index in September after a sharp 50% rally. The move followed positive phase 3 top-line results for Ionis’s olezarsen in severe hypertriglyceridemia, which delivered meaningful efficacy on both primary and secondary outcomes and, in Morningstar’s view, materially de-risks the program. Morningstar highlights Ionis’s proprietary antisense platform, durable intellectual property, and a growing late-stage pipeline as key supports for its moat rating, with partnerships helping to share development risk. With regulatory filings planned and multiple potential launches ahead, Morningstar raised its fair value estimate to $74 and maintains a constructive long-term outlook on Ionis.

Marvell Technology (MRVL), a leading provider of data center networking and custom silicon, was also a notable contributor in September following upbeat commentary from management. Morningstar notes that the CEO reaffirmed confidence in Marvell’s custom AI accelerator roadmap, easing concerns about potential share shifts and bringing market expectations closer to its thesis. The firm sees AI as the primary growth engine, with both accelerators and optical connectivity poised to benefit from sustained data center investment and a multisourcing dynamic among hyperscalers. Morningstar maintained its $90 fair value estimate and views shares as closer to fair value after the rally, with further upside if accelerator ramps and new customer programs progress as planned.

Other top contributors include Vertiv Holdings (VRT), a leading thermal and power management products within data centers; Monolithic Power Systems (MPWR), an analog and mixed-signal chipmaker specializing in power management solutions; and the supplier of automated test equipment for semiconductors, Teradyne Inc. (TER).

Companies detracting the most in September within the SMID Moat Index showed a clear tilt toward the consumer discretionary sector as four of the five laggards came from the segment. Names included online sports betting firm, DraftKing Inc. (DKNG); consumer vehicle retailer, CarMax Inc. (KMX); FanDuel online betting parent company, Flutter Entertainment (FLUT); cruise ship operator, Carnival Corp. (CCL); and consumer health firm, Kenvue (KVUE).

SMID Moat Index Top Contributors and Detractors - September 2025

Contributors

Source: Morningstar. Investing is subject to risk, including the possible loss of principal. 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. Please note that the companies highlighted here are exposed to the same market, sector-concentration, and methodology risks as the overall Moat Index, which can result in significant losses.t ETF

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 moat companies across market segments:

VanEck Morningstar US Wide Moat UCITS ETF (MOTU): Seeks exposure to US companies considered by Morningstar’s equity analysts to have durable competitive advantages and appealing valuations.

VanEck Morningstar US ESG Wide Moat UCITS ETF (MOAT): Invests in potentially attractively priced, ESG-filtered US companies identified for sustainable competitive advantages by Morningstar. ESG Screens include exclusion of companies deriving revenues from Controversial Weapons, Civilian Firearms and Thermal Coal as defined by Sustainalytics as well as companies with higher levels of ESG-related risks according to Sustainalytics Estimates. Applying ESG Screens might also cause the investment universe to be limited in size, and the ETF may perform differently compared to non-screened portfolios. Investors should check all the characteristics of the fund before making any investment decision. Relevant disclosures can be found on fund page as well as under this link.

VanEck Morningstar US SMID Moat UCITS ETF (SMOT): Focuses on potentially undervalued US small- and mid-cap companies identified for their possible durable competitive advantages.

VanEck Morningstar Global Wide Moat UCITS ETF (GOAT): Targets high-quality global companies with wide economic moats and potential for long-term growth according to Morningstar.

The ETFs mentioned involve several risks. These include stock market risk (the value of your investment can go up or down), concentration risk (the ETFs may focus on certain sectors or companies and invest in fewer securities than those tracking plain benchmarks), and currency risk (returns can be affected by exchange rate changes).

Additional risks include valuation risk (companies that seem cheap may not perform well), smaller company risk (as smaller firms can be more volatile. Because the ETFs use equal weighting, each company has the same impact on performance, which may lead to different results compared to market-cap-weighted benchmarks. There’s also a chance the ETF doesn’t fully match its index performance (tracking error).

For further information on risks and other important information, please refer to the KID/KIID and the Prospectus of the funds, available at www.vaneck.com before investing.

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