Resilience, Not Reliance

Dec 5, 2018 @ 12:01 am

For the Month Ending October 31, 2018

The Morningstar® Wide Moat Focus IndexSM (MWMFTR, or “U.S. Moat Index”) displayed strength in October relative to U.S. large cap stocks as represented by the Morningstar® US Large Cap IndexSM. The October selloff across U.S. stocks, particularly pronounced in the tech sector, wiped out a significant portion of U.S. market gains thus far in 2018. Consumer staples and utilities stocks were the only U.S. large cap sectors to post positive returns in October.

The U.S. Moat Index displayed resilience, rather than reliance on tech, and finished ahead of U.S. large cap stocks in October and for the year-to-date period.

U.S. Moats Outpacing U.S. Large Caps
As of October 31, 2018
Source: Morningstar

U.S. Moat Index Not Reliant on Tech

The U.S. Moat Index has managed to outpace U.S. large cap stocks thus far in 2018 despite a significant underweight to the information technology sector. The index has made up for this missing portion of total return with a variety of exposures in the portfolio. As the largest weighting, health care has naturally been the top contributor to index returns this year, but strong returns from communications services and consumer staples companies and modest exposure to energy has made up for the high momentum tech underweight. As tech firms continue to grapple with sector concerns, the U.S. Wide Moat Index may be well positioned to navigate potential turmoil ahead.

U.S. Moat Index Tech Underweight Results in Less Reliance for Return
YTD as of October 31, 2018
Source: Morningstar

Resilience Was More than a Tech Story

The strength displayed by the U.S. Moat Index in October was not only a result of its underweighting to tech stocks. Strong stock selection within the communication services and consumer discretionary sectors provided a significant boost for the U.S. Moat Index, along with an advantageous overweight to consumer staples stocks and underweight to energy and industrials stocks.

Resilience Beyond Tech Despite Health Care
1 Month as of October 31, 2018
Source: Morningstar

Morningstar's focus on attractive valuations is intended to result in underexposure to many of the high flying stocks that often come back to earth when markets as a whole sell off. The moat investing mantra remains: Invest in companies with sustainable competitive advantages at attractive valuations.

Now Offering Global Exposure to Morningstar's Moat Investing Philosophy

With the recent launch of the VanEck Vectors Morningstar Global Wide Moat ETF (GOAT), VanEck now offers investors four ways to access Morningstar's forward-looking equity research.

Fund Name Ticker Underlying Index Equity Exposure
VanEck Vectors Morningstar Wide Moat ETF MOAT® Morningstar® Wide Moat Focus IndexSM United States
VanEck Morningstar Wide Moat Fund MWMZX MWMIX Morningstar® Wide Moat Focus IndexSM United States
VanEck Vectors Morningstar International Moat ETF MOTI® Morningstar® Global ex-US Moat Focus IndexSM International
VanEck Vectors Morningstar Global Wide ETF GOAT Morningstar® Global Wide Moat Focus IndexSM Global

Important Disclosures This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed in this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction. This commentary is not intended as a recommendation to buy or to sell any of the sectors mentioned herein. Holdings will vary for the MOAT and MOTI ETFs and their corresponding Indices. The information herein represents the opinion of the speakers(s), but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events or a guarantee of future results. Past performance is no guarantee of future results. Current data may differ from data quoted and current market conditions may not continue. Index performance is not representative of fund performance. To view fund performance current to the most recent month end, call 888.734.6171 or visit vaneck.com. An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown. Fair value estimate: the Morningstar analyst's estimate of what a stock is worth. The Morningstar® Wide Moat Focus IndexSM and Morningstar® Global ex-US Moat Focus IndexSM were created and are maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors Morningstar Wide Moat ETF or VanEck Vectors Morningstar International Moat ETF and bears no liability with respect to the ETFs or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index and Morningstar Global ex-US Moat Focus Index are service marks of Morningstar, Inc. The Morningstar® Wide Moat Focus IndexSM consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar. The Morningstar® Global ex-US Moat Focus IndexSM consists of companies outside of the U.S. identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar. Morningstar® US Large Cap IndexSM tracks the performance of U.S. large-cap stocks that represent the largest 70 percent capitalization of the investable universe. The Morningstar® Wide Moat Focus IndexSM, Morningstar® Global ex-US Moat Focus IndexSM, and Morningstar® Global Wide Moat Focus IndexSM were created and are maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors Morningstar Wide Moat ETF, VanEck Vectors Morningstar International Moat ETF, or VanEck Vectors Morningstar Global Wide Moat ETF and bears no liability with respect to the ETFs or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index, Morningstar Global ex-US Moat Focus Index, and Morningstar® Global Wide Moat Focus IndexSM are service marks of Morningstar, Inc. Effective June 20, 2016, Morningstar implemented several changes to the Morningstar Wide Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 20 stocks to at least 40 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover, and longer holding periods for index constituents than under the rules in effect prior to this date. Effective June 20, 2016, Morningstar implemented several changes to the Morningstar Global ex-US Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 50 stocks to at least 50 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover, and longer holding periods for index constituents than under the rules in effect prior to this date. Past performance is no guarantee of future results. An investment in the VanEck Vectors Morningstar Wide Moat ETF (MOAT®), VanEck Vectors Morningstar International Moat ETF (MOTI®), VanEck Vectors Morningstar Global Wide Moat ETF (GOAT) and VanEck Morningstar Wide Moat Fund, (the “Funds”) may be subject to risks which include, among others, investing in the health care, consumer discretionary, consumer staples, industrials, telecommunications, information technology, financial services, medium-capitalization companies, equity securities, market, operational, high portfolio turnover, index tracking and data, emerging market issuers, special risk considerations of investing in European and Asian issuers, depositary receipts, cash transactions, underlying fund, new fund, market, operational, high portfolio turnover, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, replication management, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. MOAT, MOTI and GOAT Fund shares are not individually redeemable and will be issued and redeemed at their net asset value (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider a Fund's investment objective, risks, charges and expenses carefully before investing. To obtain a prospectus and summary prospectus for VanEck Funds and VanEck Vectors ETFs, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus for VanEck Funds and VanEck Vectors ETFs carefully before investing.

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