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  • Moat Investing

    Keeping Up with the Joneses

    Brandon Rakszawski, Senior ETF Product Manager
    March 21, 2019
     

    For the Month Ending February 28, 2019

    The Morningstar® Wide Moat Focus IndexSM (MWMFTR, or "U.S. Moat Index") outpaced the broad U.S. equity markets as represented by the S&P 500 Index (3.66% vs. 3.21%) in February. Tech companies became a more prominent exposure in the U.S. Moat Index following the December index review, and the sector represented an outsized portion of the U.S. Moat Index’s return for the month, similar to the broad market. Consumer staples companies were also strong contributors for the month, and all sectors posted positive returns.

    Small Exposure Packs Big Punch

    The lone real estate company in the U.S. Moat Index, Jones Lang LaSalle, Inc. (JLL, +15.14%) was the largest contributor to returns in February. JLL’s stock price surged in mid-February after the release of 2018 earnings results that beat consensus estimates. Morningstar’s equity research team believes the company is better prepared to weather potential downturns now than it was during the Great Recession.

    This is not the first time JLL has been in the index portfolio. As recently as 2016, JLL was viewed by Morningstar as undervalued and was added to the index. It was later removed as its rising stock price moved more inline with its declining fair value estimate. JLL returned to the U.S. Moat Index in September and December 2018 after a sell-off that began in early August.

    Jones Lang LaSalle (JLL): Three Year Price and Fair Value as of 2/28/2019

    Moat Stock: Jones Lang LaSalle (JLL): Three Year Price and Fair Value

    Source: Morningstar. Past performance is no guarantee of future results. For illustrative purposes only. Not a recommendation to buy or sell any security. Visit vaneck.com to view daily ETF and index holdings

    According to Morningstar, JLL benefits from intangible assets, the leading source of moats, due to its brand. A positive brand can play a key role in helping companies stay ahead of competitors by promoting sales, building trust, and inspiring customer loyalty. Morningstar’s analysts believe JLL’s brand helps the company attract both clients and talent.

     

    Important Disclosures

    The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

    This commentary is not intended as a recommendation to buy or to sell any of the sectors or securities mentioned herein. Holdings will vary for the MOAT ETF and its corresponding Index. For a complete list of holdings in the ETF, please click here https://www.vaneck.com/etf/equity/moat/holdings/.

    An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Certain indices may take into account withholding taxes. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.

    Fair value estimate: the Morningstar analyst's estimate of what a stock is worth.

    Price/Fair Value: ratio of a stock's trading price to its fair value estimate.

    The Morningstar® Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors Morningstar Wide Moat ETF and bears no liability with respect to that ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index is a service mark of Morningstar, Inc.

    The Morningstar Wide Moat Focus Index consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.

    S&P 500® Index: consists of 500 widely held common stocks covering the leading industries of the U.S. economy.

    Effective June 20, 2016, Morningstar implemented several changes to the Morningstar Wide Moat Focus Index construction rules. Among other changes, the index increased its constituent count from 20 stocks to at least 40 stocks and modified its rebalance and reconstitution methodology. These changes may result in more diversified exposure, lower turnover, and longer holding periods for index constituents than under the rules in effect prior to this date.

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