Key Takeaways

• AI spending doubts hit mega-cap tech, lifting the S&P 500 Equal Weight Index 5% while the S&P 500 declined 0.87%.
• The Moat Index returned 6.35%, beating the S&P 500 and recouping most of September’s loss on picks in technology and industrials.
• Tyler Technologies led Moat Index gains as software recovered, while AI spending doubts dragged Meta and Applied Materials.
• The SMID Moat Index returned 8.64%, leaving mid- and small-cap benchmarks behind on picks in industrials, materials and staples.
• Lamb Weston and TransUnion, September laggards, rebounded roughly 30% and 26%, respectively, on solid earnings to lead SMID Moat Index gains.

Index performance is not illustrative of fund performance. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

Market leadership reversed course in October. After a September in which technology was the only sector to advance, in October technology and communication services were the only sectors to decline, while energy and consumer staples led the market higher. The S&P 500 Index slipped 0.87%, while the S&P 500 Equal Weight Index gained 5%, reflecting a meaningful broadening of market breadth. Third-quarter earnings from several mega-cap technology companies renewed questions about the payoff from their rising artificial intelligence (AI) and data center spending, weighing on shares of Alphabet and Meta in particular. The Federal Reserve held rates steady on October 28, though a couple of officials dissented in favor of a hike, and expectations grew that the Fed could raise rates again in December.

The Morningstar Wide Moat Focus Index (the “Moat Index”) gained 6.35% in October, recovering most of its September decline and outpacing both the S&P 500 and the S&P 500 Equal Weight Index. The Index led the S&P 500 throughout the month, building an advantage of more than six percentage points by October 22 and holding most of it as mega-cap technology sold off over the final days of the month. Stock selection was the primary driver of outperformance, particularly within technology and industrials. The Index’s overweight to consumer staples and underweight to technology and communication services provided further tailwinds, reflecting its equal-weighted, valuation-conscious approach. Year to date, the Index is up 8.95%, narrowing the gap with the S&P 500’s 11.77% gain.

The Morningstar US Small-Mid Cap Moat Focus Index (the “SMID Moat Index”) rose 8.64% in October, well ahead of the S&P MidCap 400 Index’s 1.90% gain and the S&P SmallCap 600 Index’s 3.18% gain. Smaller-cap stocks outpaced the cap-weighted S&P 500 but trailed the S&P 500 Equal Weight Index, as the rotation away from mega-cap technology favored a broad range of companies. The SMID Moat Index trailed the S&P MidCap 400 through the first week of October before pulling ahead and widening its lead over the second half of the month. Stock selection was the primary driver of outperformance, led by industrials, materials and consumer staples, while an underweight to technology also contributed. The Index more than recovered its September decline and is up 12.71% year to date, ahead of the S&P MidCap 400’s 11.97% gain.

Moat Stocks Rebound as Leadership Rotates Away from Tech

Source: Morningstar. Data as of 10/31/2026. 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: Software and Staples Lead the Rotation

Stock selection drove the Moat Index’s outperformance in October, most notably within technology, where the Index’s holdings posted gains while the sector broadly declined, and within industrials. The Index’s overweight to consumer staples, one of the market’s strongest sectors, was also a key contributor, while selection within financials weighed modestly on results.

Tyler Technologies Inc. (TYL), a provider of software to state and local governments, was the top contributor, with shares rising roughly 24% as software stocks rebounded and concerns about AI disruption eased. Late in the month, Tyler reported solid third-quarter results, with software-as-a-service revenue growing 21% as more government clients migrated to the cloud. Morningstar assigns Tyler a wide moat based on switching costs, as its financial, court, tax and public safety systems are deeply embedded in government operations, and views it as among the software vendors most insulated from AI disruption. Even after the rally, shares ended October roughly 20% below Morningstar’s $500 fair value estimate.

The Estée Lauder Companies Inc. (EL), the prestige beauty company behind brands such as Clinique, Make-up Art Cosmetics and La Mer, advanced approximately 18% as investors grew more confident in its turnaround ahead of fiscal first-quarter results in early November. The company has stepped up investment in innovation and marketing while expanding into faster-growing channels, and has gained market share in China for several consecutive quarters. Morningstar assigns Estée Lauder a wide moat supported by the intangible assets in its leading brands and entrenched retailer relationships, along with scale-driven cost advantages.

Other top contributors included Constellation Brands Inc. (STZ), the U.S. importer of Modelo and Corona beer; Huntington Ingalls Industries Inc. (HII), the nation’s largest military shipbuilder; and GE HealthCare Technologies Inc. (GEHC), a medical imaging and diagnostics provider.

Companies detracting the most from Moat Index performance were concentrated among technology and communication services names tied to AI. Meta Platforms Inc. (META), the social media company; Applied Materials Inc. (AMAT), a semiconductor equipment maker; NVIDIA Corp. (NVDA), the AI chip designer; and Alphabet Inc. (GOOGL), Google’s parent company, all declined as third-quarter earnings reports renewed scrutiny of the scale and payoff of AI spending. Meta and Applied Materials had been among the Index’s top contributors in September, underscoring the reversal in market leadership. Charles Schwab Corp. (SCHW), the brokerage and wealth management firm, also weighed on results.

Moat Index Top Contributors and Detractors - October 2026

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: September Laggards Lead the Rebound

Similar to the Moat Index, stock selection was the primary driver of the SMID Moat Index’s outperformance in October, most notably within industrials, where the Index’s holdings advanced while the benchmark’s declined. Selection within materials and consumer staples also contributed, and the Index’s underweight to technology provided a further tailwind. Notably, the Index’s two largest contributors had been among its largest detractors in September.

Lamb Weston Holdings Inc. (LW), North America’s largest producer of frozen potato products, gained roughly 30% after fiscal first-quarter results showed improving profitability, continued volume growth in North America and a raised full-year outlook. A poor European potato harvest could also help ease industry overcapacity, a key headwind in recent quarters. Morningstar assigns Lamb Weston a narrow moat based on cost advantage rooted in its potato sourcing from the Columbia Basin and Idaho, where higher yields support lower per-pound costs, and continues to view the shares as undervalued relative to its $65 fair value estimate. TransUnion (TRU), one of the three major U.S. credit bureaus, rose approximately 26% following solid third-quarter results and a raise to the bottom of the range for its full-year guidance, as strength in emerging markets such as India offset slower mortgage activity. Morningstar assigns TransUnion a narrow moat based on the intangible assets in its proprietary credit data, which would be extremely difficult for a new entrant to replicate.

Other top contributors included Global Payments Inc. (GPN), a payment processing and merchant services provider; Masco Corp. (MAS), a maker of home improvement products such as Delta faucets and Behr paint; and Hasbro Inc. (HAS), the toy and game company.

Companies detracting the most from the SMID Moat Index included several materials and agriculture-related names. Albemarle Corp. (ALB), a lithium and specialty chemicals producer; CNH Industrial N.V. (CNH), a manufacturer of agricultural and construction equipment; and Corteva Inc. (CTVA), a seed and crop protection company, all declined, along with Repligen Corp. (RGEN), a bioprocessing equipment supplier, and Monolithic Power Systems Inc. (MPWR), a power management semiconductor company.

SMID Moat Index Top Contributors and Detractors - October 2026

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 Moat 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.