Market Vectors ETFs today announced the launch of Market Vectors Morningstar Wide Moat Research ETF (NYSE Arca: MOAT). This new exchange-traded fund seeks to leverage Morningstar research that aims to identify companies with potential to maintain a competitive advantage for 20+ years. MOAT seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Morningstar ® Wide Moat Focus Index SM (MWMFTR).
Morningstar’s wide-moat analysis seeks to identify companies that possess one or more sustainable, long-term competitive advantages and are expected to have high returns on invested capital relative to their cost of capital. As part of this analysis, Morningstar’s equity research team looks for such sustainable competitive advantages, or wide economic moats, as: intangible assets ( i.e., strong brands, relevant patents, special licenses or other regulatory approvals); cost advantages ( i.e., the ability to produce goods or services at a low cost relative to competitors); switching costs ( i.e., high time-related or monetary costs associated with changing from one provider/producer to another); network effects ( i.e., where the addition of new customers adds value for all customers); and efficient scale ( i.e., operating within a limited market size that has little incentive for new entrants).
Currently, approximately 10% of the broad equity universe analyzed by Morningstar receives a “wide” moat categorization; 50% receives “narrow” and 40% receives “none.” Of the U.S. equities falling into this wide-moat category, the Morningstar® Wide Moat Focus Index SM includes the 20 most attractively priced stocks according to Morningstar’s proprietary valuation methodology. For example, out of the approximately 1,200 U.S. stocks analyzed by Morningstar, it identified 112 as having wide moats as of March 31, 2012; the 20 stocks that represented the most compelling value among this wide-moat universe were included in the Morningstar® Wide Moat Focus Index SM .
From its inception in September of 2002 through March 31, 2012, the Index has outperformed the S&P® 500 Index, producing a 15.3% annualized total return (compared to 8.1% for the S&P 500). The Market Vectors ETFs website contains more detailed performance information. Please note that Index performance is not indicative of Fund performance; the Fund has no operating or performance history.“Wide-moat company analysis is a cornerstone of Morningstar’s stock investment philosophy. It is incorporated into its equity research and fund analysis. This research methodology has been successful in identifying companies likely to generate excess returns over time compared to the overall market,” said Allison Lovett, Vice President of Marketing at Market Vectors. “Because of this, we believe MOAT may offer investors a very attractive core holding for their equity portfolios.”