Undervalued Wide Moat ETF

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
NotSoDaring
Posts: 48
Joined: Sat Feb 15, 2020 6:54 am

Undervalued Wide Moat ETF

Post by NotSoDaring »

Does anyone know if Vanguard has an ETF that contains companies that are in Morningstar's Undervalued Wide Moat research?

TIA
jebmke
Posts: 19418
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Undervalued Wide Moat ETF

Post by jebmke »

Looking at the list, I'd expect them all to be in VTI.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Topic Author
NotSoDaring
Posts: 48
Joined: Sat Feb 15, 2020 6:54 am

Re: Undervalued Wide Moat ETF

Post by NotSoDaring »

jebmke wrote: Sun Jan 22, 2023 10:18 am Looking at the list, I'd expect them all to be in VTI.
Thank you for the response. I just did a comparison of the two. But it's hard to compare 4K holdings in VTI and 69 holdings in MOAT.
The worst part of MOAT is the .46 expense ratio.
I already have quite a bit of VOO, which we did instead of VTI.
sycamore
Posts: 5132
Joined: Tue May 08, 2018 12:06 pm

Re: Undervalued Wide Moat ETF

Post by sycamore »

If you mean does Vanguard have any funds that specifically follow a Morningstar index, I think the answer is no. Vanguard has funds that are benchmarked to various indexes from FTSE, CRSP, Russell, S&P, MSCI, NASDAQ, and Bloomberg Barclays - see this Vanguard institutional web page.

That doesn't mean they actually track indexes from those companies, just that they're at least benchmarked to them. They may actually track the index as well; it depends on the fund.

If you click on each benchmark option, you can see what funds Vanguard offers.

Anyway, I don't see Morningstar listed.
CletusCaddy
Posts: 1534
Joined: Sun Sep 12, 2021 4:23 am

Re: Undervalued Wide Moat ETF

Post by CletusCaddy »

NotSoDaring wrote: Sun Jan 22, 2023 12:09 pm
jebmke wrote: Sun Jan 22, 2023 10:18 am Looking at the list, I'd expect them all to be in VTI.
Thank you for the response. I just did a comparison of the two. But it's hard to compare 4K holdings in VTI and 69 holdings in MOAT.
The worst part of MOAT is the .46 expense ratio.
I already have quite a bit of VOO, which we did instead of VTI.
MOAT overlaps 15% by weight with VTI

https://www.etfrc.com/funds/overlap.php

Interestingly enough, there is one holding that MOAT has that VTI does not have - Mercadolibre which is not a US company.
wetgear
Posts: 786
Joined: Thu Apr 06, 2017 10:14 am

Re: Undervalued Wide Moat ETF

Post by wetgear »

NotSoDaring wrote: Sun Jan 22, 2023 12:09 pm
jebmke wrote: Sun Jan 22, 2023 10:18 am Looking at the list, I'd expect them all to be in VTI.
Thank you for the response. I just did a comparison of the two. But it's hard to compare 4K holdings in VTI and 69 holdings in MOAT.
The worst part of MOAT is the .46 expense ratio.
I already have quite a bit of VOO, which we did instead of VTI.
That’s mighty expensive for a fund with so little diversification. Too expensive and risky. Better to just do a total market and get exposure to those companies by default.
nix4me
Posts: 1037
Joined: Sat Oct 13, 2018 9:32 am

Re: Undervalued Wide Moat ETF

Post by nix4me »

Just buy shares of the 49 stocks. Expense ratio = 0%. Its only 49, or just buy your favorites.
User avatar
unclescrooge
Posts: 6030
Joined: Thu Jun 07, 2012 7:00 pm

Re: Undervalued Wide Moat ETF

Post by unclescrooge »

wetgear wrote: Sun Jan 22, 2023 5:13 pm
NotSoDaring wrote: Sun Jan 22, 2023 12:09 pm
jebmke wrote: Sun Jan 22, 2023 10:18 am Looking at the list, I'd expect them all to be in VTI.
Thank you for the response. I just did a comparison of the two. But it's hard to compare 4K holdings in VTI and 69 holdings in MOAT.
The worst part of MOAT is the .46 expense ratio.
I already have quite a bit of VOO, which we did instead of VTI.
That’s mighty expensive for a fund with so little diversification. Too expensive and risky. Better to just do a total market and get exposure to those companies by default.
That's a good observation, but it is incomplete.

It's not the price you pay that matters, but the value you get.

In my case, MOAT is my LC US allocation and has been for nearly 10 years.

Use the underlying index to see returns going back to 2007. Not only has it beaten SP500, it's very tax efficient as it's an ETF.

Prior to MOAT, there was an ETN that tracked the index. I don't think that exists any longer, but the track record is legit.
User avatar
nisiprius
Advisory Board
Posts: 48409
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Undervalued Wide Moat ETF

Post by nisiprius »

It's always worth asking in the forum, but there were 2,570 ETFs at the end of 2021, and many of them are trying to distinguish themselves by providing some spiffy, interesting, novel coverage, often of some little splinter of the market. Many of them are unique and do not have equivalents from any other provider.

Vanguard offers "only" 81 ETFs (and roughly 100 mutual funds), so there will be many, many ETFs that do not have Vanguard equivalent.

"Moats" are sort of a Morningstar thing, and it's a Morningstar index. I see that Sycamore already provided an answer looking at the Vanguard end, looking at what index providers Vanguard uses, and not seeing Morningstar. While they were doing that, I was looking at the other end, looking at Morningstar's list of Investable products and sorting by provider, it appears that none of Morningstar's indexes are tracked by any Vanguard products.

The days when ETFs as a group were, mostly, low-cost index products are gone. An 0.46% expense ratio for MOAT seems like a heck of a lot to pay to manage a portfolio of just 50 stocks, when the managers are not doing anything but tracking an index. I wonder why it's so expensive?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
sunnywindy
Posts: 619
Joined: Sat Jan 18, 2014 4:42 pm
Location: Wilmington, NC

Re: Undervalued Wide Moat ETF

Post by sunnywindy »

The reason why MOAT costs 0.46% ER is that Van Eck is trying to make money. $6.8 billion in AUM = $31,280,000 in yearly fees.

Generally, in investing, you pay more but you get less. With MOAT, however, you pay more but you get more.

Per Morningstar, since MOAT's inception (4/24/2012) & based on $10,000:

MOAT: 294.77% or $29,476.73
VTI: 243.96% or $24,395.72

That's $5,081.01 more in your pocket for paying more. Does paying more sound unreasonable now?

I don't own MOAT and I do own VTI, but MOAT isn't a bad fund and if you own it you're probably going to do just fine regardless of the 0.46% ER.
Powered by chocolate!
CletusCaddy
Posts: 1534
Joined: Sun Sep 12, 2021 4:23 am

Re: Undervalued Wide Moat ETF

Post by CletusCaddy »

With only 49 stocks just open up a M1 Finance account and track the index yourself. Guaranteed 0.46% outperformance over MOAT
placeholder
Posts: 6589
Joined: Tue Aug 06, 2013 12:43 pm

Re: Undervalued Wide Moat ETF

Post by placeholder »

If you decide to replicate it the etf company provides holdings percentage:

https://www.vaneck.com/us/en/investment ... /holdings/
User avatar
unclescrooge
Posts: 6030
Joined: Thu Jun 07, 2012 7:00 pm

Re: Undervalued Wide Moat ETF

Post by unclescrooge »

CletusCaddy wrote: Sun Jan 22, 2023 10:52 pm With only 49 stocks just open up a M1 Finance account and track the index yourself. Guaranteed 0.46% outperformance over MOAT
The portfolio rebalances quarterly. If you are doing this in a taxable account, the ETF is much cheaper on an after-tax basis.
CletusCaddy
Posts: 1534
Joined: Sun Sep 12, 2021 4:23 am

Re: Undervalued Wide Moat ETF

Post by CletusCaddy »

unclescrooge wrote: Mon Jan 23, 2023 1:45 am
CletusCaddy wrote: Sun Jan 22, 2023 10:52 pm With only 49 stocks just open up a M1 Finance account and track the index yourself. Guaranteed 0.46% outperformance over MOAT
The portfolio rebalances quarterly. If you are doing this in a taxable account, the ETF is much cheaper on an after-tax basis.
You’re assuming the removed companies have gains, I think it’s more likely they have losses.
User avatar
nisiprius
Advisory Board
Posts: 48409
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Undervalued Wide Moat ETF

Post by nisiprius »

sunnywindy wrote: Sun Jan 22, 2023 10:19 pm...The reason why MOAT costs 0.46% ER is that Van Eck is trying to make money. $6.8 billion in AUM = $31,280,000 in yearly fees.

Generally, in investing, you pay more but you get less. With MOAT, however, you pay more but you get more....
That is, of course, exactly what apologists for high fees have always said. "Reported returns are net of expenses. If you can get more of the cabbage, the spondulix, the shekels, why would you care about expenses?"

With MOAT, since inception, you would indeed have paid more but gotten more.

But you are also paying for it, not just in shekels, but in volatility, which has been a little higher in MOAT. It's only a bit more, but the outperformance of MOAT has only been a bit. It has had higher Sharpe and Sortino ratios so it has still done better in risk-adjusted return, but counting volatility the difference is really small.

What the similarity in Sharpe ratios tells us is that MOAT isn't doing much more for us than we could do simply by increasing stock allocation a skosh. MOAT's correlation with the market has been 0.93, which tells us that for the most part it is not doing anything hugely different from the rest of the market.

For example, compare the results, since inception of MOAT, of a portfolio of 30% Total Stock, 30% MOAT, 40% Total Bond to one of 62% Total Stock, 38% Total Bond.

Source

Image

You can argue that the portfolio with MOAT was still superior over this time range, as indeed it was, because the portfolio with MOAT had both high-ER return and low-ER volatility, but notice just how much of the difference went away when we just boosted stock allocation.

To believe that it is worth paying the 0.46% ER, you would need to believe that the hair-thin superiority of MOAT (once risk has been accounted for) is all-but-guaranteed to persist.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
placeholder
Posts: 6589
Joined: Tue Aug 06, 2013 12:43 pm

Re: Undervalued Wide Moat ETF

Post by placeholder »

unclescrooge wrote: Mon Jan 23, 2023 1:45 am
CletusCaddy wrote: Sun Jan 22, 2023 10:52 pm With only 49 stocks just open up a M1 Finance account and track the index yourself. Guaranteed 0.46% outperformance over MOAT
The portfolio rebalances quarterly. If you are doing this in a taxable account, the ETF is much cheaper on an after-tax basis.
Rebalances to what?
User avatar
nisiprius
Advisory Board
Posts: 48409
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Undervalued Wide Moat ETF

Post by nisiprius »

placeholder wrote: Mon Jan 23, 2023 5:15 pm
unclescrooge wrote: Mon Jan 23, 2023 1:45 am
CletusCaddy wrote: Sun Jan 22, 2023 10:52 pm With only 49 stocks just open up a M1 Finance account and track the index yourself. Guaranteed 0.46% outperformance over MOAT
The portfolio rebalances quarterly. If you are doing this in a taxable account, the ETF is much cheaper on an after-tax basis.
Rebalances to what?
Why do you need to "rebalance" anything if it is tracking a cap-weighted index? (Checking) Wow, it had a 47% turnover. I wonder why?
Last edited by nisiprius on Mon Jan 23, 2023 5:53 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
CletusCaddy
Posts: 1534
Joined: Sun Sep 12, 2021 4:23 am

Re: Undervalued Wide Moat ETF

Post by CletusCaddy »

nisiprius wrote: Mon Jan 23, 2023 5:46 pm
placeholder wrote: Mon Jan 23, 2023 5:15 pm
unclescrooge wrote: Mon Jan 23, 2023 1:45 am
CletusCaddy wrote: Sun Jan 22, 2023 10:52 pm With only 49 stocks just open up a M1 Finance account and track the index yourself. Guaranteed 0.46% outperformance over MOAT
The portfolio rebalances quarterly. If you are doing this in a taxable account, the ETF is much cheaper on an after-tax basis.
Rebalances to what?
Why do you need to "rebalance" anything if it is tracking a cap-weighted index?
The index itself is reconstituted pretty actively
https://www.vaneck.com/us/en/investment ... tution.pdf
User avatar
nisiprius
Advisory Board
Posts: 48409
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Undervalued Wide Moat ETF

Post by nisiprius »

CletusCaddy wrote: Mon Jan 23, 2023 5:48 pm The index itself is reconstituted pretty actively
https://www.vaneck.com/us/en/investment ... tution.pdf
Indeed. While you were finding that, I was finding the statement in the prospectus (it's so hard when they publish one prospectus for many funds) that it had a 47% turnover.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
unclescrooge
Posts: 6030
Joined: Thu Jun 07, 2012 7:00 pm

Re: Undervalued Wide Moat ETF

Post by unclescrooge »

CletusCaddy wrote: Mon Jan 23, 2023 2:01 am
unclescrooge wrote: Mon Jan 23, 2023 1:45 am
CletusCaddy wrote: Sun Jan 22, 2023 10:52 pm With only 49 stocks just open up a M1 Finance account and track the index yourself. Guaranteed 0.46% outperformance over MOAT
The portfolio rebalances quarterly. If you are doing this in a taxable account, the ETF is much cheaper on an after-tax basis.
You’re assuming the removed companies have gains, I think it’s more likely they have losses.
Having invested in this fund for 9+ years I can attest that they do.
User avatar
unclescrooge
Posts: 6030
Joined: Thu Jun 07, 2012 7:00 pm

Re: Undervalued Wide Moat ETF

Post by unclescrooge »

nisiprius wrote: Mon Jan 23, 2023 7:50 am
To believe that it is worth paying the 0.46% ER, you would need to believe that the hair-thin superiority of MOAT (once risk has been accounted for) is all-but-guaranteed to persist.
Great insight!

What is the reason for choosing to break out VTI into VTI and MOAT instead of just comparing US large cap vs MOAT?

Also, there used to be an ETN (ticker: WMW) that followed the same index, but with an ER of 0.99%!

It went back to 2007 and in 2008 it was down only 25% (if I'm remembering correctly). I don't have the data handy but it would be interesting to compare that as well.
Post Reply