Of all the ASX exchange-traded funds (ETFs) in my portfolio, of which there are a few, there's only one that I think is looking attractive right now. Sure, my index funds, which include the Vanguard Australian Shares Index ETF (ASX: VAS) and the Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO), are always solid options. But neither of these funds is looking like a screaming bargain at today's prices. At least in my opinion.
But the VanEck Morningstar Wide Moat ETF (ASX: MOAT)? That's a different story.
The VanEck Wide Moat ETF is a rather unique fund on the ASX. It is not your traditional index fund, blindly following an entire market. Instead, it is an actively managed ASX ETF that holds a relatively concentrated portfolio of US stocks.
Not just any US stock finds its way into the MOAT portfolio, though. Each holding is only selected if it appears to display signs of possessing a wide economic moat. A moat is a concept first coined by legendary investor Warren Buffett. It describes an intrinsic competitive advantage that a company can possess and use to keep its customers coming back and its competition at bay. Much as a literal moat protected a castle from marauders in days of yore.
There are many types of moats that a company might have. It could be a powerful and trusted brand, or a cost advantage that allows a company to offer consistently lower prices than its rivals. It could also be offering a product or service that customers find difficult to avoid using.
Only companies that Morningstar determines possess at least one of these moats are eligible for inclusion in the VanEck Wide Moat ETF. To illustrate, some of its current holdings include Airbnb, Microsoft, Nvidia, Nike, Disney, Clorox, Amazon, and PepsiCo.
Whether it's Airbnb's brand, Nvidia's cutting-edge chips, Disney's intellectual property assets, or Amazon's cost advantage, you can see why these companies might possess a moat.
But let's talk about this ETF itself.
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Why this ASX ETF is looking hot right now
Over long periods of time, MOAT units have returned some impressive numbers. As of 30 June, this ASX ETF has delivered an average of 14.4% per annum over the past ten years (that's growth plus dividend returns). Since inception in 2015, the number is 13.94% per annum.
Yet the past year has been a lacklustre one for this fund. Over the 12 months to 30 June, investors banked just 5.97%. Indeed, over this same period, the MOAT unit price itself has gone backwards by about 3.8%. As of today's pricing, the gap is even wider at a 6.2% loss.
Yet I think this makes this ASX ETF a compelling investing opportunity. This ETF has the runs on the board to show that its strategy is a successful one over long periods of time. As such, any pullback or departure from the mean might be a great time to pick up some units. I've had this ETF in my portfolio for many years, and it has been a lucrative investment. As such, I'm considering adding some more at current levels.
