Sure, ASX-focused exchange-traded funds (ETFs) are great for dividend income. But when it comes to chasing capital growth, there is one clear ETF winner on the share market in my eyes: the VanEck Morningstar Wide Moat ETF (ASX: MOAT).
The Wide Moat ETF is a fund built off of one of Warren Buffett's core investing tenets – chasing companies with 'wide moats'. A 'moat' is a Buffett-coined term that refers to a company's intrinsic competitive advantage. Put another way, it's the natural defence a company might possess that stops its competitors from storming the proverbial castle.
Some examples of a moat include a strong brand, a cost advantage over competitors, a product that consumers can't avoid paying for, or a switching cost that prevents customers from easily moving to a rival product or service.
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What is inside this ASX ETF?
The Wide Moat ETF aims to build a portfolio of US shares that exhibit signs of possessing such an advantage.
Some of its current portfolio holdings include Adobe Inc (NASDAQ: ADBE), Alphabet Inc (NASDAQ: GOOG), Amazon.com Inc (NASDAQ: AMZN), Walt Disney Co (NYSE: DIS), and Kellogg Company (NYSE: K).
I'm sure you can see how each of these companies possesses competitive advantages of various varieties over their competitors.
Pursuing a strategy incepted and endorsed by Warren Buffett sounds like a winning strategy. But does the rubber hit the road with the Wide Moat ETF?
Does a wide MOAT mean strong capital growth?
Well, I think its performance speaks for itself. Over the past three years, this ETF has returned an average of 15.06% per annum to its investors, 14.23% of which came from capital growth.
Over the past five years, this ASX ETF has returned an average of 16.96% per annum (15.78% from growth). That's all while charging, what I consider to be, a reasonable management fee of 0.49% per annum.
Not only do those numbers decimate what any ASX ETF has returned, but they also represent an outperformance of the US S&P 500 Index.
So sure, you might not get much in the way of franking credits or dividend income with this ETF. But the capital growth it has delivered in recent years more than makes up for it in my view.
Past performance is no guarantee of future success, of course. But I have complete faith in this ETF's Buffett-esque investing methodology, and expect it to continue to outperform going forward.
