Moat Index Adds Tech as Volatility Reveals Value
March 26, 2025
Read Time 2 MIN
The Morningstar® Wide Moat Focus IndexSM (the “Moat Index” or “Index”) underwent its quarterly review on March 21, 2025. The Index systematically targets attractively priced, high quality U.S. companies each quarter, as identified by Morningstar’s equity research analysts. Below are a few highlights from the latest review. The full results are available here:
Moat Index Reconstitution Report
Moat Index Review Takeaways:
- Volatility Brings Tech Opportunities to Surface
The Moat Index picked up several tech companies during the quarterly review as semiconductor and software companies (largely semiconductor-related software companies) found themselves in undervalued territory. Tech, which has been a significant underweight and headwind to relative Moat Index performance, may now present an opportunity. As markets sell off and become less efficient, that dynamic has historically offered the Moat Index’s systematic allocation process a chance to capitalize on companies unfairly punished by broader momentum in the market.
- Growth Exposure Increases, Value Remains Largest Overweight
Despite the pullback in U.S. equity markets, mega caps continue to dominate the S&P 500 Index’s makeup. The Moat Index’s contrarian nature has resulted in a value bias relative to the headline large cap index and allows investors to meaningfully participate in the U.S. equity market with the added benefit of portfolio diversification. The Index’s methodology also allows it to target attractive valuation opportunities regardless of a company’s “style.” This quarter, the Moat Index’s growth exposure increased slightly while its value exposure decreased.
- Semiconductor Innovation Propels Moat Index Newcomers
There were two companies that were added to the Moat Index for the first time in its over 17-year history. Morningstar believes that as long as the semiconductor industry exists and is innovating, these two companies will be a necessary part of that innovation and earn excess returns on invested capital:
Cadence Design Systems (CDNS): Cadence provides leading-edge electronic design automation tools and IP critical to the semiconductor chip design process. It benefits from switching costs and intangible assets and was upgraded to a wide moat rating from narrow in December 2024. It historically traded well above fair value until February of this year.
Synopsys (SNPS): Like Cadence, Synopsys specializes in electronic design automation software used by engineers in the chip design and build phases. SNPS benefits from switching costs and intangible assets. Its moat rating was also upgraded from narrow to wide in December 2024.
1Q 2025 Moat Index Review Results
Moat Index Sector Shifts Following 1Q 2025 Review
Moat Index Sector Exposure Relative to S&P 500 Index
Moat Index Style Exposure Relative to S&P 500 Index: Value Bias Persists
Source: Morningstar. As of 3/21/2025 unless otherwise noted.
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VanEck Morningstar Wide Moat ETF (MOAT) and VanEck Morningstar Wide Moat Fund seek to replicate as closely as possible, before fees and expenses the price and yield performance of 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 MOAT ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: MOAT - VanEck Morningstar Wide Moat ETF - Holdings.
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 S&P 500 Index consists of 500 widely held common stocks covering the leading industries of the U.S. economy.
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 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 MOAT ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here: MOAT - VanEck Morningstar Wide Moat ETF - Holdings.
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 S&P 500 Index consists of 500 widely held common stocks covering the leading industries of the U.S. economy.
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 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.