Looking for moat stocks – gurufocus. com

According to Warren Buffett ( Trades, Portfolio), the best businesses to invest in are those with wide economic moats. Gas mask tattoo Unfortunately, Buffett has never actually defined what he means by this, although I doubt there is a strict definition.

A business moat can take several forms, but ultimately, if a company has a wide business moat it can generate a higher return on equity and higher return on invested capital for a longer period than its rivals. Gas constant for nitrogen The classic example is Coca-Cola ( NYSE:KO).

Coca-Cola’s moat is its brand. Gas emoji The brand is recognized all over the world as a hallmark of quality, taste and refreshment, but a brand isn’t the only type of business moat there is. Z gas station Other economic advantages, such as economies of scale or ownership of a particular asset (such as a low-cost mine or national infrastructure network) can also qualify as moats. Kansas gas service login Companies such as the U.K.’s National Grid ( LSE:NGG), which controls virtually the entire country’s electricity network, have an enormous competitive advantage over the majority of peers (National Grid has no competitors and likely never will).

Buffett has built his fortune investing in moat companies, and you can now replicate his success with the VanEck Vectors ™ Morningstar Wide Moat index ( ARCA:MOAT). Electricity deregulation wikipedia The index tracks the performances of companies considered to have wide moats by Morningstar’s analysts; 91% of the time the index has outperformed the Standard & Poor’s 500 over five-year rolling periods between March 2007 through September 2016. Gas prices map According to backtests, since 2002 the Morningstar Wide Moat Focus Total Return index saw returns of 700% compared to a return of 260% for the S&P 500 total return index.

So how does the index find its positions? Well, according to the literature the index provides exposure to companies with Morningstar Economic Moat Ratings trading at lower market prices than their intrinsic values. Electricity generation in california The index follows a staggered rebalancing approach. Ortega y gasset Under this method, the holdings are divided into two subportfolios, each containing 40 stocks. Npower electricity power cut One subportfolio reconstitutes in December and June while the other subportfolio reconstitutes in March and September.

When selecting companies, and giving them an Economic Moat Rating, Morningstar’s analysts are looking for a “structural competitive advantage,” which is defined as a competitive advantage that allows a company to protect its market share in a dynamic business environment.

The VanEck Vectors™ Morningstar Wide Moat ETF seeks to replicate Morningstar’s moat analysis, and a look at the fund’s top holdings reveals a lot about what kind of companies are generally considered to have wide moats.

The top five holdings constitute 13.1% of assets under management. Year 6 electricity Topping the list at 2.6% of assets under management is Twenty-First Century Fox Inc. Gas oil mix ratio chart ( NASDAQ:FOXA). K gas station jobs Next up is Bristol-Myers Squibb Co. ( NYSE:BMY), followed by Walt Disney Co. ( NYSE:DIS), Compass Minerals International ( NYSE:CMP) and American Express ( NYSE:AXP). Gas upper stomach All of these holdings come in at around 2.6% of assets. Electricity voltage in paris Year to date the net asset value of the index is up 21.2% compared to a return of 9.8% the S&P 500 total return index.

The one interesting point to note about the fund is that it changes its holdings relatively regularly. Cheapest gas in texas Unlike Buffett, who likes to keep moat investments for as long as possible, it appears the fund has a high equity turnover. Gas utility bill At the end of October, the ETF’s largest positions were Harley-Davidson ( NYSE:HOG) at 3.0% followed by Time Warner ( NYSE:TWX) at 3.0%, Tiffany (TIF) at 2.9%, Microsoft (MSFT) at 2.8% and MasterCard (MA) at 2.8%.

The ETF might be built on a fascinating concept, but the index appears to trade too much for it to be a Buffett proxy. Electricity usage That said, the index’s holdings are kind of interesting and provide some food for thought for those investors looking to buy companies with wide economic moats.

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