The ASX exchange-traded fund (ETF) VanEck Morningstar Wide Moat ETF (ASX: MOAT) might be a top performer in the coming years, in my view.
There's talk from CEOs that under the Trump leadership, there could be plenty of economic growth in the United States. As the Australian Financial Review reported, South32 Ltd (ASX: S32) CEO Graham Kerr said about Trump's effect:
…I think a lot of US-based businesses, or people that do business in the US, are probably excited about what it means for economic growth.
Trump — who took office as US president this week — apparently wants to deregulate and help businesses. Time will tell what the long-term rewards and impacts of that will be.
In my opinion, the MOAT ETF could be an effective way to invest during this period. All of its company holdings are US-listed, but they are seen as potential long-term winners, so any negatives in the next few years shouldn't hamper their long-term success too much.
US stocks with a wide economic moat
The ASX ETF looks to find companies that, according to Morningstar, have long-term competitive advantages:
For a company to earn a wide economic moat, excess normalized returns must, with near certainty, be positive 10 years from now. In addition, excess normalised returns must, more likely than not, be positive 20 years from now.
In other words, these companies are expected to earn good profits for at least two decades. For Morningstar, the duration of the competitive advantages is "far more important" than the size of the moat.
Some of the sources of the economic moat include cost advantage, intangible assets, switching costs, network effect, and efficient scale.
Attractively priced stocks
The ASX ETF only invests in these great businesses when they're trading at a lower price than what the analysts think the business is worth.
If the share market is going to boom during the Trump era, then I'd expect that would be a strong positive for the MOAT ETF. I also think it's important that investors stay reasonable with what price they're willing to buy investments at. We saw during 2022 and 2023 how valuations can quickly go backwards if they have risen too far. The MOAT ETF's strategy of buying at a good price should help with this.
If there is a US or global downturn, then the MOAT ETF's ownership of businesses that could make good profits for decades may help cushion any share price declines.
In other words, I think this fund has a good chance of outperforming the overall global/ASX share market whether stocks go up or down.
Since the MOAT ETF's inception, it has returned an average of 16.2%, which is higher than the S&P 500 Index (SP: .INX). Of course, there's never a guarantee it will continue to outperform the S&P 500.
