With almost $900 million in funds under management, the VanEck Morningstar Wide Moat ETF (ASX: MOAT) is a popular exchange-traded fund (ETF) on the ASX.
Although not quite in the same league as the index fund heavy-hitters like the Vanguard Australian Shares Index ETF (ASX: VAS), many Australian investors have entrusted the MOAT ETF with their hard-earned cash.
Most index funds are incredibly simple, and easy to wrap one's head around. VAS, for example, holds the largest 300 shares on the ASX, weighted by market capitalisation. Nothing more, nothing less.
MOAT is another kettle of fish, though, and works a little differently from a basic index fund. So today, let's dive deeper into the VanEck Wide Moat ETF, see how it works, and discuss what an investor will actually own if they buy this ASX ETF.
Unlike a simple index fund, MOAT uses a complex approach to build an underlying portfolio of investments that the ETF indirectly allows investors to purchase. Its portfolio is determined by a series of formulas. These seek to identify US stocks that show clear signs of possessing a wide economic moat.
This term, originally coined by legendary investor Warren Buffett, refers to a durable competitive advantage that a company can possess. It is used to keep customers within the company's 'walls', as well as keeping competitors out.
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What's in the VanEck Wide Moat ETF?
This competitive advantage could be a strong brand, a low-cost advantage, or providing a good or service that customers find difficult to replace or avoid using.
The VanEck Wide Moat ETF identifies a series of companies that show signs of possessing at least one of these moats, and adds said company to its portfolio if the price is attractive. As such, MOAT tends to have a portfolio of around 50 individual stocks, all held at an equal weighting.
Here are the fund's current ten largest stocks, as of 15 May:
- Fortinet Inc
- NXP Semiconductors N.V.
- NVIDIA Corporation
- Mondelez International Inc
- Airbnb Inc
- Masco Corp
- Bristol-Myers Squibb Co
- Kenvue Inc
- Constellation Brands
- Microsoft Corporation
As you can see, there are clearly some wide moats there. It could be Microsoft's sticky Office or Windows software suites, Nvidia's dominance in AI and chip technology, Airbnb's network effects, or the power of Mondelez and Constellation's popular brands (which include Cadbury chocolate and Corona beer, respectively).
Some other names that you may recognise in MOAT's current portfolio include Amazon, Nike, PepsiCo, and Walt Disney Company.
The VanEck Morningstar Wide Moat ETF charges a management fee of 0.49% per annum.
