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Investing Specialists

Ideas From the Wide Moat Focus Index

Morningstar StockInvestor editor Matt Coffina discusses recent additions to the Wide Moat Focus Index.

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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.