What's Driving the Wide Moat Focus Outperformance
Our index of the cheapest wide-moat stocks benefited from an overexposure to healthcare stocks in the third quarter.
Andrew Lane: Within the Morningstar equity research department, we keep a close eye on the performance of the Wide Moat Focus Index, a collection of the cheapest U.S. wide-moat-rated stocks under our coverage. Typically, the strategy holds roughly 50 stocks, with the reconstitution and rebalancing process taking place four times per year. The index is important to us, as its construction represents the cross section of our differentiated economic moat methodology and our rigorous bottom-up valuation work.
In the third quarter of 2018, the Wide Moat Focus Index outperformed its benchmark, the Morningstar US market index, by 23 basis points. Through the first nine months of 2018, the strategy only slightly bested its benchmark by a total of 8 basis points, having delivered an absolute total return just shy of 11%. Since the index's October 2007 live inception date, it has beaten its benchmark by nearly 4% annually, an impressive long-term track record.
Andrew Lane does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.