Moat Investing - ETF Strategy
28 June 2019
Watch Time 2:52
Moat investing is based on a simple concept: invest in companies with sustainable competitive advantages trading at attractive valuations. Morningstar turns this philosophy into an actionable investment strategy.
Moat Investing, Powered by Morningstar
VO: Moat, a term first coined by Warren Buffet.
What is an economic moat?
VO: A company’s ability to maintain competitive advantages and fend off its competition in order to protect its long-term profits and market share. Moat investing is based on a simple concept: invest in companies with sustainable competitive advantages trading at attractive valuations.
Morningstar turns the moat investing philosophy into an actionable investment strategy.
VO: Morningstar has identified 5 sources of competitive advantages (or moats):
Switching costs: Whether in time or money, the expenses that a customer would incur to change from one producer/provider to another
Intangible assets: Brands, patents, and regulatory licenses that block competition and/or allow companies to charge more.
Network effect: When the value of a service grows as more people use a network
Cost advantage: Allows firms to sell at the same prices as competition and gather excess profit and/or have the option to undercut competition
Efficient scale: When a company serves a market limited in size, new competitors may not have an incentive to enter.
In order to avoid overpaying for moat companies, Morningstar assigns each company a fair value based on its projected future cash flows and assesses its current price against this fair value. This forward-looking valuation approach allows long-term investors to look beyond a company’s current price and potential noise in the market.
Leverage Morningstar’s forward-looking moat investment philosophy across global equity markets through VanEck’s Moat Investing strategy.
VanEck’s moat investing strategy offers: moat companies, attractive valuations, Morningstar’s Equity Research.