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  • Moat Investing

    Strong Finish to 2017

    Brandon Rakszawski, Senior ETF Product Manager
    January 09, 2018

    For the Month Ending December 31, 2017

    Performance Overview

    International moats, as represented by the Morningstar® Global ex-US Moat Focus IndexSM ( MGEUMFUN, or "International Moat Index"), trailed the MSCI All Country World Index ex-USA in December (1.75% vs. 2.24%), but finished with full-year outperformance of greater than 3% (30.36% vs. 27.19%). The U.S.-oriented Morningstar® Wide Moat Focus IndexSM ( MWMFTR, or "U.S. Moat Index") followed a strong November with positive relative performance in December, toping the broad U.S. markets as represented by the S&P 500® Index (1.66% vs. 1.11%). The U.S. Moat Index finished the year ahead by roughly 2% (23.79% vs. 21.83%).

    International Moats: Japan Weighs, Australia and Brazil Boost

    Together with several firms from Japan, utilities and telecommunications firms struggled in the International Moat Index for the month. The bottom three performing companies in the International Moat Index were Japanese companies. Nippon Telegraph & Telephone Corp (9432 JP, -10.43%), which owns mobile telephone operator NTT DoCoMo, struggled in December after posting quarterly results generally in line with expectations in November. SoftBank Group Corp (9984 JP, -6.58%) also struggled in December. The company has a wide range of international and e-commerce investments in its portfolio, some of which compete directly with the aforementioned Nippon Telegraph & Telephone Corp. On the other side of the coin, financials and consumer discretionary companies contributed strongly to International Moat Index returns and the Index also received a strong boost from companies in Australia, Hong Kong, Canada, and Brazil. The International Moat Index standout was Brazilian aviation company Embraer SA (EMBR3 BZ, +26.46%), following speculation that Boeing was in talks to buy the company. Shares of Embraer SA shot up and approached Morningstar's fair value estimate of $26 per share at year end.

    U.S. Domestic Moats: Consumer Discretionary Shines

    Consumer discretionary companies were the primary driver of strong performance for the U.S. Moat Index in December. While Express Scripts Holding Co (ESRX US, +14.51%) was the top performing index constituent in December, firms such as Lowe's Companies, Inc. (LOW US, +11.48%), Twenty-First Century Fox Inc. (FOXA US, +8.11%), and L Brands Inc. (LB US, +7.40%) helped consumer discretionary lead the way. Tech firm Veeva Systems Inc. (VEEV US, -8.19%) was the worst performing stock in the U.S. Moat Index after issuing 2019 fiscal year guidance below expectations. The firm provides client relationship management services to the pharmaceutical industry and Morningstar lowered its fair value estimate four dollars to $65 on December 6th. The consumer staples and information technology sectors were the two sectors to detract from index performance, but only slightly.


    (%) Month Ending 12/31/17

    Domestic Equity Markets

    International Equity Markets

    (%) As of 12/31/17

    Domestic Equity Markets

    International Equity Markets

    (%) Month Ending 12/31/17

    Wide Moat Focus Index (MWMFTR)

    Top 5 Index Performers
    Constituent Total Return
    Express Scripts Holding Co 14.51
    John Wiley & Sons Inc Class A 11.70
    Lowe's Companies Inc 11.48
    AmerisourceBergen Corp 8.25
    Twenty-First Century Fox Inc Class A 8.11

    Bottom 5 Index Performers
    Constituent Total Return
    Veeva Systems Inc Class A -8.19
    Allergan PLC -5.90
    CVS Health Corp -5.35
    General Electric Co -3.94
    Gilead Sciences Inc -3.53

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

    Global ex-US Moat Focus Index (MGEUMFUN)

    Top 5 Index Performers
    Constituent Total Return
    Embraer SA 26.46
    MGM China Holdings Ltd 18.50
    Samsonite International SA 11.22
    Magellan Financial Group Ltd 9.79
    Crown Resorts Ltd 8.62

    Bottom 5 Index Performers
    Constituent Total Return
    Nippon Telegraph & Telephone Corp -10.43
    SoftBank Group Corp -6.58
    Hoshizaki Corp -6.52
    China Resources Gas Group Ltd -6.06
    Sanofi SA -5.54

    View MOTI's current constituents

    As of 12/15/17

    Wide Moat Focus Index (MWMFTR)

    Index Additions
    Added Constituent Ticker
    Cardinal Health Inc CAH US
    Veeva Systems Inc A VEEV US
    Merck & Co Inc MRK US
    Western Union Co WU US
    Microchip Technology Inc MCHP US

    Index Deletions
    Deleted Constituent Ticker
    Berkshire Hathaway BRK/B US
    BlackRock Inc BLK US
    CH Robinson Worldwide Inc CHRW US
    Patterson Cos Inc PDCO US
    Polaris Inds Inc PII US
    T Rowe Price Group Inc TROW US

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

    Global ex-US Moat Focus Index (MGEUMFUN)

    Index Additions
    Added Constituent Country
    Telecom Italia SpA Italy
    Lloyds Banking Group Plc United Kingdom
    SoftBank Group Corp Japan
    Beijing Enterprises Holdings Ltd. China
    Millicom Intl Cellular S.A. - SDR Sweden
    Bank of China Ltd H Shares China
    Nordea AB Sweden
    Gas Natural SDG SA Spain
    Bayer AG Germany
    Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. Mexico
    Smiths Group United Kingdom
    GKN United Kingdom
    Swedbank AB Sweden
    TransCanada Corp Canada
    KDDI Corp Japan
    GEA AG Germany
    Danske Bank A/S Denmark
    Samsonite International SA Hong Kong
    Contact Energy Ltd New Zealand
    Vodafone Group United Kingdom
    Siemens AG Germany
    Grupo Aeroportuario del Pacifico, S.A.B. de C.V. Mexico
    Infosys Ltd India

    Index Deletions
    Deleted Constituent Country
    Cemex SA CPO Mexico
    Symrise AG Germany
    HeidelbergCement AG Germany
    China Telecom Corporation Ltd. - H Shares China
    ENN Energy Holdings Ltd China
    Nippon Tel & Tel Corp Japan
    Nidec Corp Japan
    Murata Manufacturing Co Ltd Japan
    Telefonica Brasil S.A. - Prf Brazil
    GlaxoSmithKline United Kingdom
    Ansell Ltd Australia
    CSL Ltd Australia
    QBE Insurance Group Ltd Australia
    Novartis AG Switzerland
    Julius Baer Group Switzerland
    Elekta B Switzerland
    Danone France
    Safran SA France
    Bureau Veritas SA France
    Tata Motors Ltd India
    DBS Group Holdings Singapore
    CapitalLand Commercial Trust Singapore

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