This is my notes on the video covering the MOAT ETF. Grammar my be incorrect
Overview
- 7.2b AUm
- 18.51% annual returns for the last 5 years
- And a 0.47% expense ration
What Is A Moat
- Other report:
- Wide Narrow and None
- But what exactly does Morningstar mean by "economic moat"? As per VanEck:
Economic Moat ratings represent the sustainability of a company's competitive advantage. Wide and narrow moat ratings represent Morningstar's belief that a company may maintain its advantage for at least 20 years and at least 10 years, respectively. An economic moat rating of none indicates that a company has either no advantage or an unsustainable one. Quantitative factors used to identify competitive advantages include returns on invested capital relative to cost of capital, while qualitative factors used to identify competitive advantages include customer switching cost, cost advantages, intangible assets, network effects, and efficient scale.
How Does MOAT Choose Their Holdings
- The Price to fair value is a little wonky. It’s based on their “proprietary internal analysis”
- Sales Force Has a PE of 139.74 but a p/fv of 0.83 https://ycharts.com/companies/CRM/pe_ratio
How Has The Index Performed
- “The Morningstar Wide Moat Focus Index has delivered more than 300 basis points of annual excess returns versus the broader U.S. equity market since its early 2007 live inception date.
- https://www.vaneck.com/us/en/etf/moat/moat-the-impact-of-moat-and-valuation-screens.pdf (pg4)
- Higher risk adjusted returns. 08 - 19 sharpe .78 vs .53 for total US market
- A focus on valuation has boosted excess returns for the Wide Moat Focus Index.
Where Have The Returns Came From?
- https://www.vaneck.com/us/en/etf/moat/moat-the-impact-of-moat-and-valuation-screens.pdf (pg1)
- Index live 2/14/2007 and through 6/30/20 they attribute
- 1.1% to the economic moat
- 1.3% to equal weighting
- 1.0% to their valuation
Factor Analysis
- https://www.vaneck.com/us/en/investments/morningstar-wide-moat-etf-moat/moat-morningstar-wide-moat-focus-index-through-a-factor-lens.pdf
- Size and liquidity premiums have the highest active contributiono
- After q2 2016 they went from a 20 holdings to 40 holdints (pg 5)
- Interesting: The Wide Moat Focus Index Exhibits a Lower Quality Factor Loading Than the Broader Market, Vaneck believes thi s to be because their economic moat ratings are forward looking while quality factor metris are in backward-looking
Performance Vs S&P 500
3% outperformance of US Total market is largely driven by index returns since the creation of index in 2007.
Since launch of the actual ETF in 2012 it has slightly outperformed the S&P 500.
It has substantially outperformed the large value index as represented by Vanguards Large Cap Value Index (VIVAX). Since 4/30/2012 fund inception, it has had total return of 316.75% vs the Large Value at 230.14%
Final Thoughts
- I Like the relative narrow portfolio
- It Could perform better when we are not in such a strong bull market with
- This could represent the value allocation of a portfolio and offer outperformance of that asset class.
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