Matt Murphy, Director of National Accounts at VanEck, joined Keith Black, Managing Director of RIA Channel, to discuss investing in companies with long-term sustainable competitive advantages.
Economic moat investing involves identifying companies that have a sustainable competitive advantage relative to their industry competitors. Companies with a long-term competitive advantage may be able to generate economic profits long into the future. Morningstar research seeks to identify companies where these competitive advantages will last longer than twenty years. Before investing, it is important to not only identify companies with a moat but also the right price to pay for their shares.
Each quarter, the VanEck Morningstar Wide Moat ETF (MOAT) equally weights the fifty most undervalued companies that Morningstar’s equity research team has determined to have a wide moat, selected from the 1,500 companies they cover. Murphy notes that advisors are pairing the concentrated moat ETFs with more broadly diversified equity index funds. The S&P 500 Index is also becoming increasingly concentrated, with 35% of the weight held in the top nine stocks.
In addition to the MOAT ETF, which generally holds large-cap US stocks, other VanEck Moat ETFs focus on other objectives, including ESG, growth, value, small and mid-cap, global, and international stocks.
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