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Why the US Moat Index Beat the S&P 500 Index in July

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Nov. 20 2020, Updated 10:44 a.m. ET

VanEck

Performance Overview

Domestic moat companies, as represented by the Morningstar® Wide Moat Focus IndexSM (MWMFTR, or “U.S. Moat Index”), once again posted strong results in July, outperforming the S&P 500® Index (4.11% vs. 3.72%, respectively) and pulled ahead on a year-to-date basis (7.15% vs. 6.47%). International moats outpaced the broad international market for the second straight month, and returned to roughly even on a year-to-date basis relative to the broad international market. The Morningstar® Global ex-US Moat Focus IndexSM (MGEUMFUN, or “International Moat Index”) led the MSCI All Country World Index ex-USA modestly in July (2.84% vs. 2.39%, respectively)

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Market Realist

As the graph above shows, the Morningstar U.S. Wide Moat Focus Index has not only beaten the S&P 500 Index (SPY) year-to-date (or YTD) but also over the long term.

Meanwhile, the Morningstar Global ex-U.S. Wide Moat Focus Index, which tracks international wide-moat stocks, has also outperformed the MSCI All-Country World Index ex-USA in July YTD and long-term. However, their respective US counterparts have outperformed them comprehensively over the years.

In July, the U.S. Wide Moat Index found help in a rally in the healthcare sector, which has the heaviest weight in the index. Pharmaceutical company Eli Lilly and Co. (LLY), which is the biggest component of the index with a ~3% weight in the index, surged 15.8%. Biogen (BIIB) climbed 15.2% in July, which also helped prop up the index.

A good number of stocks from the consumer staples segment were added to the index in July, including Pepsi (PEP), Procter and Gamble (PNG), Colgate-Palmolive (CL), and Campbell Soup (CPB). The consumer staples sector now accounts for around 20% of the index.

You can invest in US wide-moat stocks via the VanEck Vectors Morningstar Wide Moat ETF (MOAT), which tracks the Morningstar U.S. Wide Moat Focus Index. The VanEck Vector International Moat ETF (MOTI) tracks the Morningstar Global ex-U.S. Wide Moat Focus Index.

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