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  • Moat Investing

    A Comeback Story for Moats in November

    Brandon Rakszawski ,Senior ETF Product Manager
    December 11, 2017
     

    For the Month Ending November 30, 2017

    Performance Overview

    International moats, as represented by the Morningstar® Global ex-US Moat Focus IndexSM (MGEUMFUN, or "International Moat Index"), ended November in line with the MSCI All Country World Index ex-USA (0.80% vs. 0.81%). The International Moat Index remains 3.71% ahead year-to-date. The U.S.-oriented Morningstar® Wide Moat Focus IndexSM (MWMFTR, or "U.S. Moat Index") bounced back in November after several underwhelming months, outpacing the broad U.S. markets as represented by the S&P 500® Index (4.30% vs. 3.07%).

    International Moats: Balancing the Scale

    Cameco Corp. (CCO CN, +15.53%), which has displayed volatility in recent months, saw its price increase in November following its announcement of uranium production cuts. These cuts, among others across the industry, reaffirmed Morningstar's expectation of future uranium price increases which may benefit Cameco Corp. in the long-term. China's largest internet service provider and WeChat operator, Tencent Holdings Ltd. (700 HK, +13.66%), saw its Morningstar fair value estimate increase by approximately $19 in November. Much of that driven by Morningstar's revised view of the company's growth and margins. Regionally, the International Moat Index benefited from strong contributions from Asia. While financials and real estate companies provided strong contributions, many of these were offset by negative contributions from companies in the healthcare and information technology sectors. Performance out of Sweden, United Kingdom, and Mexico was weak.

    U.S. Domestic Moats: Recovery Stories

    L Brands, Inc. (LB US, +31.88%) recovered in a big way throughout the month, following a difficult summer. Morningstar equity analysts pointed out recently that the company's performance metrics are trending in the right direction despite some problems with its Victoria's Secret and Bath & Body Works brands. Morningstar's fair value estimate for L Brands was adjusted down in August from $71 to $69 following weaker-than-expected near-term earnings and remains at $69 following third-quarter earnings. Consumer discretionary, led by L Brands, was the top contributing sector for the U.S. Moat Index, followed by strong contributions by healthcare and financials companies. Industrials was the only sector to detract from index performance, driven primarily by negative performance from General Electric Co. (GE US, -9.28%). Morningstar's fair value estimate for GE was reduced in November from $29 to $26 as the company continues to grapple with a long-term restructuring effort.

     

    (%) Month Ending 11/30/17

    Domestic Equity Markets

    International Equity Markets

    (%) As of 11/30/17

    Domestic Equity Markets

    International Equity Markets

    (%) Month Ending 11/30/17

    Morningstar
    Wide Moat Focus Index (MWMFTR)

    Top 5 Index Performers
    Constituent Total Return
    L Brands Inc 31.88
    Twenty-First Century Fox Inc Class A 22.14
    CVS Health Corp 11.78
    T. Rowe Price Group Inc 10.79
    AmerisourceBergen Corp 10.76

    Bottom 5 Index Performers
    Constituent Total Return
    General Electric Co -9.28
    Guidewire Software Inc -6.99
    Stericycle Inc -6.41
    Cardinal Health Inc -4.38
    Zimmer Biomet Holdings Inc -3.72

    View MOAT's current constituents
    View MWMZX's current constituents

    Morningstar
    Global ex-US Moat Focus Index (MGEUMFUN)

    Top 5 Index Performers
    Constituent Total Return
    Cameco Corp 15.53
    Tencent Holdings Ltd 13.66
    MGM China Holdings Ltd 13.30
    Kao Corp 10.48
    CapitaLand Commercial Trust 10.18

    Bottom 5 Index Performers
    Murata Manufacturing Co Ltd -12.95
    Elekta AB B -12.90
    SINA Corp -9.18
    Telefonica Brasil SA Pfd Shs -5.90
    Cemex SAB de CV -5.89

    View MOTI's current constituents

    As of 9/15/17

    Morningstar
    Wide Moat Focus Index (MWMFTR)

    Index Additions
    Added Constituent Ticker
    Patterson Cos Inc PDCO US
    General Electric Co GE US
    Cardinal Health Inc CAH US
    Mondelez International Inc MDLZ US
    Medtronic plc MDT US
    Schwab Charles Corp SCHW US
    Western Union Co WU US
    Veeva Systems Inc A VEEV US
    Pfizer Inc PFE US
    Merck & Co Inc MRK US

    Index Deletions
    Deleted Constituent Ticker
    Cerner Corp CERN US
    Guidewire Software GWRE US
    Gilead Sciences Inc GILD US
    Varian Medical Systems Inc VAR US
    Quintiles IMS Holdings, Inc. Q US
    Yum! Brands Inc YUM US
    Jones Lang Lasalle Inc JLL US
    State Street Corp STT US
    Mastercard Inc A MA US

    View Latest MOAT Reconstitution Report
    View MOAT's list of current constituents

    Morningstar
    Global ex-US Moat Focus Index (MGEUMFUN)

    Index Additions
    Added Constituent Country
    Cameco Corp Canada
    SoftBank Group Corp Japan
    Lloyds Banking Group Plc United Kingdom
    Roche Hldgs AG Ptg Genus Switzerland
    Millicom Intl Cellular S.A. - SDR Sweden
    Enbridge Inc Canada
    Embraer S.A. Brazil
    QBE Insurance Group Ltd Australia
    Telecom Italia SpA Italy
    Orange France
    Samsonite International SA Hong Kong
    East Japan Railway Co Japan
    Hoshizaki Electric Co Ltd Japan
    Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. Mexico
    Canadian Pacific Railway Ltd Canada
    China Resources Gas Group Ltd. China
    America Movil SAB de CV L Mexico
    Fanuc Co Japan
    Nordea AB Sweden
    Commonwealth Bank Australia Australia
    Airbus SE France
    Gas Natural SDG SA Spain
    Inditex SA Spain
    Luxottica Group SpA Italy
    Westpac Banking Corp Australia
    Magellan Financial Group Limited Australia
    Siemens AG Germany
    HeidelbergCement AG Germany

    Index Deletions
    Deleted Constituent Country
    Carnival Plc United Kingdom
    GlaxoSmithKline United Kingdom
    Shire Plc United Kingdom
    Tata Motors Ltd India
    Dongfeng Motor Group Co. Ltd. - H Shares China
    China Mobile Ltd. China
    China Construction Bank Corp H Shares China
    Beijing Enterprises Holdings Ltd. China
    Genting Singapore Plc Singapore
    CapitaLand Commercial Trust Singapore
    Capitaland Ltd Singapore
    United Overseas Bank Singapore
    Singapore Exchange Ltd Singapore
    Rakuten Inc Japan
    Nippon Tel & Tel Corp Japan
    KDDI Corp Japan
    Telstra Corp Ltd Australia
    Ramsay Health Care Ltd Australia
    Iluka Resources Ltd Australia
    DuluxGroup Ltd Australia
    Ioof Hldgs Ltd Australia
    Novartis AG Reg Switzerland
    Potash Corp of Saskatchewan Canada
    Baytex Energy Corp. Canada
    Ambev S.A. Brazil
    Sun Hung Kai Properties Ltd. Hong Kong
    Swire Properties Ltd Hong Kong
    KION Group AG Germany

    View Latest MOTI Reconstitution Report
    View MOTI's list of current constituents