The VanEck Morningstar Wide Moat ETF (ASX: MOAT) is one of the investments I'm considering for my next ASX buy.
Long-time readers will know I've regularly written about this ASX exchange-traded fund (ETF) and how much I like it as a long-term holding.
It has a great track record of delivering long-term returns and this could be a good time to buy.
The MOAT ETF has a track record of outperforming the S&P 500 over the past decade, but it has significantly underperformed in the last year, following the huge boom of businesses involved in artificial intelligence.
The analyst team in charge of picking the stocks don't usually have a huge weighting to tech shares, the fund is normally diversified across a range of sectors. That explains the underperformance in recent times, but I think its strategy can deliver outperformance in the longer-term, particularly from today's starting valuations.
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Excellent businesses
I do believe that AI will continue to go from strength to strength, but at this stage, I'm not expecting all the businesses involved to make as much profit as the valuations suggest. There will probably be winners and losers.
The MOAT ETF targets profitable businesses at valuations that makes sense, with an expectation the competitive advantages will continue for the ultra-long-term.
Specifically, the Morningstar analysts want to invest in businesses that have economic moats that are strong and expected to (more likely than not) endure for at least 20 years. That's a great, long-term horizon and ensures the ASX ETF is only invested in businesses that are truly high-quality. That alone makes this a compelling ASX buy.
Some of the businesses that currently tick the box of long-term competitive advantages in the portfolio include Applied Materials, Huntington Ingalls Industries, Thermo Fisher Scientific, Estee Lauder, Agilent Technologies and West Pharmaceutical Services.
As you can see, its top holdings (above) are from a variety of sectors, giving it good diversification, but they're all capable of delivering good returns. There are a total of 53 positions in the portfolio, which I think is an adequate amount to reduce risk without necessarily impacting returns.
Good value
The businesses in the fund are good value. That doesn't mean it targets businesses with low price/earnings (P/E) ratios, but instead it's aiming for companies that are trading beneath what the analysts think they're worth.
With a watchlist of just high-quality names, buying any of them at an attractive price is appealing. A whole portfolio of great value, strong businesses can lead to pleasing results.
Over the last 10 years, the MOAT ETF has returned an average of 15.5% per year, without heavily relying on technology businesses.
Following underperformance of the tech sector, I think this could be a good time to invest in the MOAT ETF. I'd be very surprised if I didn't own some units before the end of November. It may well be my next ASX buy.
