Which ASX share is my favourite right now?
Well, that's a tricky question. There are quite a few shares in my ASX portfolio, and each one is there for a reason. Some provide some portfolio ballast, even though I know they're not going to be the shares that shoot the lights out over the next few years. Others are just there as a hedge against another share market crash or share market instability in general. And I do have some 'high-conviction' ideas that I'm hoping are going to at least offer the chance of a '10-bagger' return or better.
But the share I'm going to name as my favourite falls into none of the above categories. It's a share that I own for market-beating performance as well as providing a decent stream of dividend income. It's a healthy 'core holding' of my portfolio.
This share is the VanEck Vectors Wide Moat ETF (ASX: MOAT).
Moat?
This exchange-traded fund (ETF) gets its name from the 'moat' concept. A moat is an idea popularised by the great investor Warren Buffett. He describes a moat as an 'intrinsic competitive advantage' a company has that protects it from 'attackers' or competition. There are many types of moats a company can have, but the most common are a powerful brand, a product ecosystem that 'locks' customer in, and a 'toll bridge' moat where customers simply have to use a company's products or services due to a lack of alternatives.
Think of the companies Warren Buffett is famous for investing in. Apple Inc (NASDAQ: AAPL) arguably has one of the best brands in the world that elicits its customers to pay far more for an Apple product than any competitor. It's a similar story with the Coca-Cola Company Inc (NYSE: KO), which has one of the most recognisable brands on the planet.
Alternatively, think of Intel Corporation (NASDAQ: INTC). The vast majority of personal computers sold today, whether that be an Apple or a Windows, has an Intel chip in it. That means that consumers can't really avoid using Intel's products if they want a computer of most descriptions – a form of a 'toll-bridge moat'.
The MOAT ETF holds only companies that display these characteristics. That's why you'll currently find Intel and Coca-Cola in MOAT's holdings, as well as companies like Kellogg Company (NYSE: K), Amazon.com Inc (NASDAQ: AMZN) and American Express Co (NYSE: AXP).
Because of this investing philosophy, MOAT has managed to return an average of 18.61% per annum over the past 10 years. That's an amazing return in my view and one that both exceeds the S&P 500 Index as well as the S&P/ASX 200 Index (ASX: XJO). And that's why MOAT is my favourite ASX share right now.
