Moat Stocks Balance an AI-Concentrated Market
November 03, 2026
Read Time 4 min
Key Takeaways
- The top 10 stocks in the S&P 500 now make up about 40% of the index, above levels seen before the dot-com bust.
- Equal weighting and a valuation focus make the wide moat index a counterweight to that concentration.
- A closer look at four timely holdings spanning technology and consumer discretionary sectors illustrates how the strategy finds value.
- NVIDIA brings AI growth exposure while NXP offers tech diversification with less AI exposure.
- Tractor Supply and Lowe's valuations may offer entry points in out-of-favor retail.
How the Moat Investing Strategy Works
The Morningstar Wide Moat Focus Index is a rules-based strategy that holds US companies Morningstar rates as having wide economic moats, or durable competitive advantages, and that look undervalued. The index equal weights its holdings and rebalances quarterly.
That design matters now. With the top 10 S&P 500 stocks near 40% of the index at the end of Q3, broad market exposure delivers less diversification than it once did. Equal weighting and a valuation focus make the index a counterweight to top-heavy benchmarks, particularly when artificial intelligence (AI) leadership narrows or fades.
In a recent webinar, Get Selective: Wide Moats for Q4, Morningstar equity analysts provided a closer look at the latest quarterly rebalance. Valuation drove most of the turnover in the September rebalance. Consumer staples is now the index’s largest sector overweight. Since quarter end, Nike and Fair Isaac have also lost their wide moat ratings and will be phased out.
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Moat Stocks in Focus
Morningstar analysts walked through four timely holdings, covering source of moat and how Morningstar’s fair value estimate compares to their valuation.
NVIDIA
- Morningstar fair value estimate: $310
- Sources of moat: Intangible assets for graphics processing unit (GPU) design, and switching costs tied to the CUDA software ecosystem, networking and rack-scale systems.
- Analyst notes: NVIDIA is a full-weight holding, though the index remains well underweight the broader market. Morningstar applies a 20 times earnings multiple, roughly a market multiple, to a company expected to grow 70% next year. Risks include energy supply, financing, and market share loss. Analysts see rising token usage and firm GPU rental prices as signs of a supply-constrained market.
Tractor Supply
- Morningstar fair value estimate: $42
- Sources of moat: Intangible assets for its brand as the only national farm retailer.
- Analyst notes: Another full-weight holding, the stock has fallen this year. Comparable sales growth has stayed below 2%, earnings before interest and taxes (EBIT) margin slipped from about 10% in 2023 to about 8.5%, and the company withdrew its 2029 targets. Shares rose about 4.5% on earnings day. Prescriptions, direct sales to larger landowners, and retail media are new growth levers. Morningstar's estimate needs only about 100 basis points of margin gain over the next decade.
NXP
- Morningstar fair value estimate: $310
- Sources of moat: Intangible assets, including decades of expertise in reliable analog and mixed-signal chips, and high customer switching costs once a chip is designed into a product.
- Analyst notes: Automotive accounts for about half of the business, and customers paid for reliability over price during the 2021 to 2022 chip shortage. The stock trades near 13 times forward consensus earnings, about half the multiple of peer Texas Instruments. With less AI exposure than its peers, NXP may be unloved today, but that makes it a diversifier within technology.
Lowe's
- Morningstar fair value estimate: $255
- Sources of moat: A broad brand intangible asset and a cost advantage from scale, with about $92 billion in estimated 2026 sales giving it negotiating leverage with suppliers.
- Analyst notes: Added in the September review at about a half weight, Lowe's has been undervalued for six months amid higher rates, weak housing turnover, and a stretched consumer. Comparable sales have been flat or negative since about 2023, yet operating margin held near 12%, down from roughly 13%. Housing stock older than 40 years supports repair demand. Low single-digit comparable sales growth would get shares to fair value.
Moat Stocks Make the Case for Diversification
Moat stocks can complement broad market exposure, particularly when the AI trade pauses or market breadth widens. The strategy can lag when AI-driven leadership narrows, but equal weighting and a valuation focus give the index a different return profile from top-heavy benchmarks.
Investors can access this approach through the VanEck Morningstar Wide Moat ETF (MOAT) and the VanEck Morningstar Wide Moat Fund, which both seek to track the Morningstar Wide Moat Focus Index.
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Important Disclosures
Source for all data unless otherwise noted: Morningstar.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets mentioned is unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Holdings will vary for the funds and their corresponding benchmark indices. For a complete list of holdings in the ETF, please click here: (MOAT ETF) MOAT- VanEck Morningstar Wide Moat ETF - Holdings and MWMZX - VanEck Morningstar Wide Moat Fund - Class Z - Overview.
Effective June 20, 2016, Morningstar implemented several changes to the Morningstar Wide Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 20 stocks to at least 40 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover, and longer holding periods for index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.
An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
The Morningstar moat-driven indexes represent various regional exposures and consist of companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.
The S&P 500 Index consists of 500 widely held common stocks covering the leading industries of the U.S. economy.
The S&P 500® Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2026 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
Price-to-fair value represents the trading price of a stock or group of stocks relative to their Morningstar-assigned fair value estimate.
The Morningstar® Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Morningstar Wide Moat ETF or VanEck Morningstar Wide Moat Fund and bears no liability with respect to the funds or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar® Wide Moat Focus IndexSM is a service mark of Morningstar, Inc.
The Morningstar® Wide Moat Focus IndexSM Intended to track the overall performance of attractively priced companies with sustainable competitive advantages according to Morningstar's equity research team.
An investment in the VanEck Morningstar Wide Moat ETF (MOAT®) may be subject to risks which include, among others, risks related to investing in equity securities, health care sector, consumer staples sector, industrials sector, information technology sector, financials sector, medium-capitalization companies, market, operational, high portfolio turnover, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversification, index-related concentration and competitive advantage assessment risks, all of which may adversely affect the Fund. Medium-capitalization companies may be subject to elevated risks.
You can lose money by investing in the VanEck Morningstar Wide Moat Fund. Any investment in the Fund should be part of an overall investment program rather than a complete program. The Fund is subject to risks which may include, but are not limited to, risks related to consumer staples sector, competitive advantage assessment, equity securities, financials sector, health care sector, high portfolio turnover, index tracking, industrials sector, industry concentration, information technology sector, market, medium-capitalization companies, non-diversification, operational, passive management, and underlying fund investments risk, all of which may adversely affect the Fund. Medium-capitalization companies may be subject to elevated risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
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Important Disclosures
Source for all data unless otherwise noted: Morningstar.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets mentioned is unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Holdings will vary for the funds and their corresponding benchmark indices. For a complete list of holdings in the ETF, please click here: (MOAT ETF) MOAT- VanEck Morningstar Wide Moat ETF - Holdings and MWMZX - VanEck Morningstar Wide Moat Fund - Class Z - Overview.
Effective June 20, 2016, Morningstar implemented several changes to the Morningstar Wide Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 20 stocks to at least 40 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover, and longer holding periods for index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results.
An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
The Morningstar moat-driven indexes represent various regional exposures and consist of companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.
The S&P 500 Index consists of 500 widely held common stocks covering the leading industries of the U.S. economy.
The S&P 500® Index is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2026 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
Price-to-fair value represents the trading price of a stock or group of stocks relative to their Morningstar-assigned fair value estimate.
The Morningstar® Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Morningstar Wide Moat ETF or VanEck Morningstar Wide Moat Fund and bears no liability with respect to the funds or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar® Wide Moat Focus IndexSM is a service mark of Morningstar, Inc.
The Morningstar® Wide Moat Focus IndexSM Intended to track the overall performance of attractively priced companies with sustainable competitive advantages according to Morningstar's equity research team.
An investment in the VanEck Morningstar Wide Moat ETF (MOAT®) may be subject to risks which include, among others, risks related to investing in equity securities, health care sector, consumer staples sector, industrials sector, information technology sector, financials sector, medium-capitalization companies, market, operational, high portfolio turnover, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversification, index-related concentration and competitive advantage assessment risks, all of which may adversely affect the Fund. Medium-capitalization companies may be subject to elevated risks.
You can lose money by investing in the VanEck Morningstar Wide Moat Fund. Any investment in the Fund should be part of an overall investment program rather than a complete program. The Fund is subject to risks which may include, but are not limited to, risks related to consumer staples sector, competitive advantage assessment, equity securities, financials sector, health care sector, high portfolio turnover, index tracking, industrials sector, industry concentration, information technology sector, market, medium-capitalization companies, non-diversification, operational, passive management, and underlying fund investments risk, all of which may adversely affect the Fund. Medium-capitalization companies may be subject to elevated risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.