This is a report from BI Chinese Station on November 4th.
In an interview with Fortune magazine in 1999, legendary investor and stock god Warren Buffett coined the term "economic moats" to sum up the pillars of his investment strategy. His description at that time was as follows:
"as far as investment is concerned, the key is not to assess how much impact an industry will have on society, nor how much growth it will achieve, but to determine the competitive advantage of any particular company. the most important thing is to determine the duration of that advantage. Have a broad, sustainable 'moat' products or services to bring returns to investors. "
Since the article was published in Fortune magazine, the concept of "economic moat" has become deeply rooted in the hearts of the people. Investment research firm Morningstar has created an index to track companies with broad "economic moats" to see if Buffett's theory holds up. In 2012, VanEck, an asset manager, created an exchange-traded fund (ETF) called MOAT to track Morningstar's "economic moat" index.
"the moat is dug around the castle in order to protect the castle from enemy attacks and keep invaders out, and the same idea can be applied to enterprises, because enterprises can build a 'moat' to protect their profits." Brandon Brandon Rakszawski, an exchange-traded fund product manager at VanEck, said in a telephone interview with Business Insider. "(MOAT ETF) basically 'captured' the core stock research conducted by more than 100 analysts at Morningstar."
MOAT has performed well so far, with a return of 22.31% so far this year, compared with a 13.21% gain for the s & p over the same period. Since its inception in 2012, the fund has returned an average of 13.73% a year, compared with an average annual gain of 12.02% for the s & p 500 over the same period.
The fund is made up of shares of many household names, includingWells Fargo & Co, Lowe's Companies Inc Company,AmazonAndStarbucksWait. The fund adjusts its holdings every quarter, weighing its holdings based on Morningstar's moat index.
Morningstar analysts meet at least once a week on the moat committee, which is made up of 20 senior analysts, some of whom are experts focused on specific sectors, Mr Laxavisky said. Junior analysts will submit research reports to the committee, which will choose to accept their research or ask them to conduct further research. The committee will then give a final "moat" score to the companies it tracks.
Some companies are judged to have no moat, so MOAT funds basically ignore these stocks. In companies that are judged to have a moat, Morningstar will determine whether its moat is narrow or wide, based on how long its competitive advantage can be maintained. According to Laxavesky, the threshold for a wide moat is 20 years.
The judging process is very strict, so it can lead to highly reliable and forward-looking scores, as well as some interesting results, Laxavesky said.
Facebook Inc is a good example. About a year after Facebook Inc IPO (initial public offering) went public, the company entered [MOAT fund] at an attractive time, and then it performed very well. " Laxavesky said. Since then, Facebook Inc has been in and out, this is because the industry sector where the company is located has the characteristics of fast pace change.
The fund currently has total assets of $1.3 billion. That means it is one of the top 250 equity funds in the U. S. market, according to Bloomberg data.
Since the fund was founded, Buffett's Berkshire Hathaway (Berkshire Hathaway) shares have risen by an average of 17.04% a year. That compares with an average annual return of 13.7% for MOAT and 12% for the s & p 500. (nebula)