Delegate the Work of Valuation
17 May 2021
The part of Morningstar’s economic moat research process that I like the most is that Morningstar ascribes a “fair value” to each of the stocks that it covers. Based on this fair value, at each quarterly review of the Morningstar® Wide Moat Focus IndexSM, over-valued wide moat stocks leave the index and under-valued stocks enter the index.
There are not many ETFs that provide this benefit.
While the Morningstar Wide Moat Focus Index is anything but a value strategy, it is interesting to note that the index has recently shifted towards a “value” bias.
Valuation Opportunities Drive Style Exposure
Size of circles increase from start date to end date. 31 March 2021, represented by white outline.
Source: Morningstar. Morningstar style box represents the holdings-based exposure to market capitalization (Micro through Giant capitalization) and style (Deep Value through High Growth).
Some of those changes may surprise you. In March 2021, the index added Google and sold Bank of America.
Attractive Price/Fair Value Brings Alphabet (GOOGL) into the Moat Index
Source: Morningstar. Data as of 31/3/2021. Past performance is no guarantee of future results. For illustrative purposes only.
Bank of America (BAC) Exits the Moat Index After Becoming Over-valued
Source: Morningstar. Data as of 31/3/2021. Past performance is no guarantee of future results. For illustrative purposes only.
Moat Index Q1 Review: Buys and Sells
| Added Index Constituents | |
| Company | Ticker |
| Alphabet Inc A | GOOGL |
| Facebook Inc A | FB |
| Cerner Corp | CERN |
| ServiceNow, Inc. | NOW |
| Tyler Technologies Inc | TYL |
| Roper Technologies Inc | ROP |
| Adobe Inc | ADBE |
| Northrop Grumman Corp | NOC |
| Dominion Energy Inc | D |
| Removed Index Constituents | |
| Company | Ticker |
| US Bancorp | USB |
| Microchip Tech | MCHP |
| Lam Research Corp | LRCX |
| Applied Materials Inc | AMAT |
| Polaris Inc | PII |
| Bank of America Corp | BAC |
| John Wiley & Sons Inc. A | JW.A |
| Charles Schwab Corp | SCHW |
| American Express Co | AXP |
Source: Morningstar.
If you’d like to receive regular moat investing updates, please subscribe here.
Morningstar® Wide Moat Focus IndexTM is a trade mark of Morningstar inc. and has been licensed for use for certain purposes by VanEck. VanEck Morningstar US Wide Moat UCITS ETF is not sponsored, endorsed, sold or promoted by Morningstar and Morningstar makes no representation regarding the advisability of investing in VanEck Morningstar US Wide Moat UCITS ETF.
Important Disclosure
This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.
This information originates from VanEck (Europe) GmbH, which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin).
The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice VanEck (Europe) GmbH, VanEck Switzerland AG, VanEck Securities UK Limited and their associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Brokerage or transaction fees may apply.
All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.
© VanEck (Europe) GmbH / VanEck Asset Management B.V.
Related Insights
Related Insights
24 October 2024
24 October 2024