Moat Stocks Gain on Health Care Strength, Tech Slowdown

Key Takeaways:

• Moat Index gained 1.53% in November, supported by health care and broader market participation.
• Merck and Amgen were top Moat Index contributors, benefiting from strong demand and pipelines.
• SMID Moat Index rose 1.43%, aided by materials strength but offset by consumer discretionary and technology weakness.
• Sealed Air and Albemarle led SMID Moat Index contributors on M&A activity and a lithium rebound.

U.S. equities delivered a modest gain in November, but market dynamics shifted meaningfully beneath the surface. While the S&P 500 added just 0.25% during the month, performance broadened across the market, with the equal-weighted S&P 500 rising 1.90% and outpacing its market-cap-weighted counterpart. The wider participation marked a contrast to the narrow leadership seen most of the year. Sector leadership rotated as well, with health care posting the strongest returns of any major segment, while technology, after a stretch of sustained outperformance, saw a notable pullback. Investors continued to digest a mix of economic data and evolving expectations around Federal Reserve policy, creating a backdrop that favored more defensive and valuation-supported areas of the market.

In November the Morningstar Wide Moat Focus Index (the “Moat Index) benefited from sector positioning, gaining 1.53% and outperforming the S&P 500. The Moat Index’s overweight to health care, which was the top-performing sector during the month, provided a meaningful tailwind, while its underweight to technology helped soften the impact of weakness across that segment. Improved market breadth also aided performance relative to prior months, during which narrow leadership had presented a challenge for equal-weighted strategies.

Smaller-cap equities also participated in November’s broader advance, though to varying degrees across size cohorts. The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) rose 1.43% during the month, outperforming the S&P 500 but trailing more pure small-cap segments. As with the Moat Index, sector positioning within health care contributed positively, as did strong selection within the materials segment, though pockets of weakness in consumer discretionary and technology weighed on overall results.

November Health Care Rebound Supports Moat Strategies

Source: Morningstar. Data as of 11/30/2025. 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 Highlights: Health Care Leads the Charge

In November, the Moat Index benefited from a favorable combination of broader market participation and a strong rebound in health care, a sector to which the strategy is overweight. The Moat Index’s allocation to the area contributed meaningfully to relative performance. At the same time, the strategy’s underweight to technology, which lagged the broader market, provided an additional tailwind to relative performance.

The drug manufacturer, Merck & Co. (MRK), was the top contributor to the Moat Index in November, with share price gains of more than 20%, as the company continued to demonstrate durable performance across its diversified pharmaceutical portfolio. Merck’s leadership position in oncology, including its flagship immunotherapy Keytruda, and its growing presence across vaccines and cardiometabolic care remain central to Morningstar’s wide-moat assessment. Analysts also highlight the strength of Merck’s pipeline, which includes late-stage programs capable of supporting revenue through the next decade.

Also within the top contributors this month was fellow health care leader Amgen Inc. (AMGN). Amgen benefited from renewed investor confidence in its broad portfolio of biologic therapies and its expanding pipeline in cardiology, oncology, and immunology. Morningstar continues to view Amgen’s free cash flow generation as a key competitive advantage, supported by biologics that carry strong pricing power and by the company’s growing biosimilar franchise. Shares advanced 16% during the month, as the market rewarded businesses with stable demand dynamics amid heightened uncertainty in more cyclical sectors.

Rounding out the top contributors were consumer health company Kenvue Inc. (KVUE); semiconductor equipment provider Applied Materials Inc. (AMAT); and the technology conglomerate and AI leader Alphabet Inc. (GOOGL).

Companies detracting the most in November notably belonged within technology, reflecting the broader sector’s pullback. Names include customer relationship management technology firm Salesforce Inc. (CRM); enterprise software solutions company Workday Inc. (WDAY); semiconductor materials and filtration specialist Entegris Inc. (ENTG); and chipmaker NXP Semiconductors (NXPI). Outside of technology, aerospace and defense company Boeing Co. (BA) detracted modestly.

Moat Index Top Contributors and Detractors - November 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: Packaging and Lithium Lead

The SMID Moat Index ended November with a positive return, supported by contributions from companies across several sectors. Similarly to the Moat Index, the strategy’s overweight to health care offered support given the strength of the broader sector. Materials also proved additive, with three of the top five contributors for the month belonging to the sector. However, weakness in consumer discretionary and technology, alongside select communication services holdings, offset some of these gains.

The packaging solutions company, Sealed Air Corp. (SEE), was the top contributor to the SMID Moat Index in November, as shares surged following the announcement that the company had agreed to be acquired by CD&R in a transaction valued at approximately $10.3 billion, or $42.15 per share. The all-cash offer represented a meaningful premium to Sealed Air’s prior trading levels and immediately drove a sharp rerating in the stock during the month. The market responded positively to the deal’s valuation and certainty, with shares rising significantly and contributing meaningfully to Index performance.

Albemarle Corp. (ALB), a fully integrated lithium producer, was also a leading contributor, supported by a rebound in lithium-related equities after a period of volatility. Morningstar continues to view Albemarle’s low-cost lithium and bromine operations as core components of its moat rating, with long-lived resources and scale advantages that position the company well for long-term demand growth. While near-term lithium pricing remains uncertain, the firm’s competitive position and disciplined capital management supported a strong share price recovery in November as shares of ALB gained more than 30%.

Other top contributors within the SMID Moat Index during the month included Expedia Group Inc. (EXPE), a leading global online travel platform; Ionis Pharmaceuticals Inc. (IONS), a biotechnology company focused on RNA-targeted therapies; and DuPont de Nemours Inc. (DD), a diversified manufacturer of specialty materials and chemical solutions.

Companies detracting the most in November within the SMID Moat Index spanned multiple sectors, but consumer discretionary stood out. Names included Norwegian Cruise Line (NCLH), a global cruise operator; HubSpot Inc. (HUBS), a cloud-based marketing software provider; Etsy Inc. (ETSY), an online marketplace; Bath & Body Works Inc. (BBWI), a retailer of personal care and home fragrance products; and Warner Music Group (WMG), a multinational music entertainment company.

SMID Moat Index Top Contributors and Detractors - November 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.

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