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Wide Moat ETF Is On A Tear

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Not many exchange traded funds, particularly ones that have been on the market awhile, have been making new highs in recent weeks. One noticeable exception to that disappointing trend is the Market Vectors Morningstar Wide Moat ETF (NYSE: MOAT).

MOAT was one just 16 ETFs to hit an all-time high Thursday. On a day in which U.S. stocks were drubbed, MOAT found a way to add to its impressive year-to-date showing, which now stands at a gain of 13.8 percent.

Followers of Warren Buffett have heard the Oracle of Omaha espouse the virtues of wide moat investing and MOAT is an ETF that makes that strategy accessible to investors in basket form. The ETF follows the Morningstar Wide Moat Focus Index “which is intended to track the overall performance of the 20 most attractively priced companies with sustainable competitive advantages according to Morningstar's equity research team,” according to Market Vectors.

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MOAT's underlying “index has generated significant excess returns relative to the overall market since inception,” according to Market Vectors. The benchmark is more than nine years old, so the track record is substantial.

Investors should note MOAT isn't the everyday diversified U.S. equity ETF. In fact, MOAT holds just 21 stocks, underscoring the point that isn't easy for a company to attain wide moat status. Sometimes luck factors in and that may be why MOAT rose Thursday.

The ETF's largest holding is St. Jude Medical Inc. (NYSE: STJ). It was revealed on Thursday that Abbott Laboratories (NYSE: ABT) will acquire St. Jude. St. Jude is 6.5 percent of MOAT's weight, an allocation of 100 basis points more than the ETF's second-largest holding.

MOAT could end the week by hitting more new highs because LinkedIn Corp. (NYSE: LNKD), which is almost 4.8 percent of the ETF's weight, surged more than 8 percent during Thursday's after-hours session after delivering earnings that beat analysts' estimates.

As for MOAT's status as an ETF that can give investors an avenue to some of Buffett's stock-picking acumen, consider the following: MOAT holds shares of railroad operator as well as Dow component Visa Inc. (NYSE: V), Mastercard Inc. (NYSE: MA) and US Bancorp (NYSE: USB). Those three stocks are Berkshire Hathaway equity holdings.

MOAT has an international equivalent, the Market Vectors Morningstar International Moat ETF (NYSE: MOTI), which is up 5.4 percent year-to-date.

Posted-In: Long Ideas Broad U.S. Equity ETFs Specialty ETFs Trading Ideas ETFs

 

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