Ideas From the Wide Moat Focus Index
Morningstar StockInvestor editor Matt Coffina discusses recent additions to the Wide Moat Focus Index.
Morningstar StockInvestor editor Matt Coffina discusses recent additions to the Wide Moat Focus Index.
Morningstar recently concluded the third-quarter rebalancing of the Wide Moat Focus Index, which contains the 20 cheapest wide-moat stocks based on price/fair value ratios, excluding master limited partnerships and most foreign companies. It is equal-weighted and rebalanced quarterly. It is also the basis for the exchange-traded fund with the ticker MOAT. Over the trailing 1- and 5-year periods as of Oct. 4, the Wide Moat Focus Index had delivered a total return of 25.4% and 17.1% per year, respectively. This easily outperformed the S&P 500's 18.3% and 11.5% annual total return, respectively, over the same periods.
Since Morningstar StockInvestor follows a similar strategy to the Wide Moat Focus Index--buying companies with very strong competitive advantages when they are trading for discounts to their intrinsic values--I find the regular index rebalancing to be a useful source of potential investment ideas. Below are the nine companies that were recently added to the index, along with my take on each.
Matthew Coffina has a position in the following securities mentioned above: ITC, KO, JNJ, KMR, NOV, SLB, FB, VMC. Find out about Morningstar’s editorial policies.