The Morningstar Wide Moat Focus Index tracks companies that earn Morningstar Economic Moat Ratings of wide and that are trading at the lowest current market price to fair value. How has this cluster of high-quality names performed over time? Pretty well: The index has beaten the S&P 500 during the trailing one-, three- and five-year periods. As a result, the index’s constituents are a fertile hunting ground for investors looking for high-quality stocks trading at reasonable prices.
In an effort to keep the index focused on the least-expensive high-quality stocks, we reconstitute the index regularly. The index consists of two subportfolios containing 40 stocks each, many of which are overlapping positions. The subportfolios are reconstituted semiannually in alternating quarters, on a "staggered" schedule. We re-evaluate the index's holdings and add and remove stocks based on a preset methodology. Because stocks are equally weighted within each subportfolio, the reconstitution process also involves right-sizing positions.
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Susan Dziubinski does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.