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3 ETPs to Play Buffett's Moat Advantage

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Updated December 26, 2024

Warren Buffett speaking — / Contributor / Getty Images

Legendary investor Warren Buffett believes that the most critical factor in picking a successful investment is determining the durability of a company's competitive advantage or "moat." An 澳洲幸运5官方开奖结果体彩网:economic moat refers to a company's ability to maintain a competitive advantage over its competitors to protect its profits and market share.🎶

A company can create a moat through cost advantages, having a size advantage, ensuring high switching costs, and possessing unique intangibles, such as patents and 澳洲幸运5官方开奖结果体彩网:brand recognition. For example, Apple Inc. (AAPL) has created an economic moat through its perceived quality and brand recognition that has allowed the company to protect market share fr𒐪om competitors offering lower-priced products.

Investors who want to embrace the central pillar of Buffett's investment strategy should consider these three 澳洲幸运5官方开奖结果体彩网:exchange-traded products 𒐪(ETPs) that provide exposure to compa𝓡nies that have sustainable economic moats.

Key Takeaways

Legendary investor, Warren Buffett, recommends investing in companies with strong competitive advantages, known as "economic moats," that protect their market share.
Economic moats can be created through factors such as brand recognition, cost advantages, patents, or making it too costly for customers to switch to competitors.
Some exchange-traded funds (ETFs) track indexes that focus on companies with strong competitive advantages.
These ETFs offer a wide breadth of options for U.S. investors, allowing them to gain exposure to domestic and international moat-focused strategies.

澳洲幸运5官方开奖结果体彩网:VanEck Vectors Morningstar Wi🔯de Moat ETF (MOAT)

The VanEck Vectors Morningstar Wide Moat ETF, formed in 2012, aims to provide returns similar to those of the Morningstar Wide Moat Focus Index. The fund does this by investing its assets in securities that comprise the underlying index.

These securities are companies that Morningstar Inc. deems to have a substantial competitive advantage gained from proprietꦐary operations and assets, such as patents and high switching costs.

As o𝐆f Dec. 24, 2024, the top five holdings in the🧔 company are:

Walt Disney
Bristol-Myers Squibb
Alphabet
Boeing
Gilead Sciences

In total, the fund's basket holds 52 stocks.

The VanEck Vectors Morningstar Wide Moat ETF has 澳洲幸运5官方开奖结果体彩网:assets under management (AUM) of $15.47 billion as of Dec. 24, 2024. Its net expense ratio is 0.47%. As of Nov. 30, 2024, the fund has three- and five-year average annualized returns of 11.45% and 13.93%, respectively. Year to date (YTD), MOAT has returned 16.01%.

VanEck Vectors Morningstar International Moat ET✨✨F (MOTI)

Launched in 2015, the VanEck Vectors Morningstar International Moat ETF seeks to track the performance of the Morningstar Global Markets ex-US Wide Moat Focus Index. The manager achieves this by investing the majority of the fund's assets in securities that comprise the 澳洲幸运5官方开奖结果体彩网:benchmark index.

These are primarily international companies that Morniဣn🍷gstar believes to have a competitive advantage and attractive valuation.

As of Dec. 24, 2024, the ETF's top five holdings are:

Yum China
Jd.Com
Inner Mongolia Yili Industrial
Harmonic Drive Systems
Tencent Holdings

In total, the fund's basket holds 49 stocks.

The VanEck Vectors Morningstar International Moat ETF has net assets of $153.84 million as of Dec. 24, 2024, and a net expense ratio of 0.58%. The fund has three- and five-year average annualized returns of 3.58% and 3.49%, respectively, as of Nov. 30, 2024. Year to date (YTD), MOTI has returned 3.82%

Important

Funds with lower 澳洲幸运5官方开奖结果体彩网:expense ratios allow investors to keep more of their returns.

VanEck Vectors Morn✨ingstar Global Wide Moat ETF (MOTG)

The VanEck Vectors Morningstar Global Wide Moat ETF, launched in 2018, seeks to track the performance of the Morningstar Global Wide Moat Focus Index. VanEck does this by investing most of the fund's assets in securities that make up the benchmark index.

These are primarily global companies that Morningstar believes to h𝓡ave sustainable competitive adv⛦antages and attractive prices.

As of Dec. 24, 2024, the ETF's top five holdings are:

Walt Disney
Taiwan Semiconductor Manufacturing
Alphabet
Tencent Holdings
Rheinmetall

In total, the fund's basket holds 75 stocks.

The fund has net assets of $14.73 million as of Dec. 24, 2024, and a net expense ratio of 0.52%. The fund has three- and five-year average annualized returns of 5.58% and 8.95%, respectively, as of Nov. 30, 2024. Year to date (YTD), MOTG has returned 13.74%.

What Is Meant by an Economic Moat?

An economic moat is a competitive advantage that allows a compa𒊎ny to maintain market share and 💟profits. It is a unique factor that protects companies from competitors for the long term. Examples of economic moats include brand loyalty/recognition, cost advantages, intellectual property, high switching costs for customers, and a strong distribution network.

What Is Apple's Economic Moat?

Apple has many economic moats, or competitive advantages, that allow it to be an outsized player in its market. The company consistently innovates new products, such as the iPhone and Apple Watch, allowing for product differentiation amongst competitors. It has an entrenched ecosystem, allowing customers to connect hardware, software, and services into a seamless user experienꦦce.

The company also has massive brand loyalty. In addition, it's difficult for customers to switch from Apple to competitors if they utilize more than one product, as laptops, phones, tablets, and watches are all connected. The company also has tight control over its seamless supply chain, allowing for efficiency and consistent product quality.

Is the S&P 500 an Exchange-Traded Fund (ETF)?

No, the ﷽S&P 500 is not an exchange-traded fund (ETF). It is a stock index that tracks the largest 500 companies in the U.S. by market cap. Many investment funds, however, track the S&P 500 and seek to replicate its returns by purchasing shares of the 500 companies. Investors seeking to gain exposure to the S&P 500 can invest in one of many mutual funds or ETFs that track the index.

The Bottom Line

One of Warren Buffett's investment strategies is to invest in companies that have a strong competitive advantage, known as an economic moat. These "moats" allow companies to maintain 澳洲幸运5官方开奖结果体彩网:market share and profits.

Investors can gain access to companies with economic moats by investing in exchange-traded products (ETNs) that track moat indexes. VanEck offers a variety of moat ETFs that track the different moat indexes created by Morningstar. These allow investors to gain exposure and diversification to moat companies at a low cost.

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