For the Month Ending September 30, 2016
The U.S.-oriented Morningstar Wide Moat Focus Index (MWMFTR, or "the U.S. Moat Index") underperformed the S&P 500 Index in September (-1.66% vs. 0.02%). Despite lagging for the month, the U.S. Moat Index has posted very strong absolute and relative performance in 2016. Year-to-date through September, it has outperformed the S&P 500 Index by more than 10 percentage points (18.09% vs. 7.84%). International moats also outperformed for the month, with the Morningstar Global ex-US Moat Focus Index (MGEUMFUN, or "the International Moat Index") outpacing the MSCI All Country World Index ex USA by more than one percentage point (2.33% vs. 1.23%).
U.S. Domestic Moats: Overcoming Controversy
Ailing Wells Fargo & Company (NYSE:WFC) did its share to pull down the performance of the U.S. Moat Index in September. WFC is in the midst of regulatory turmoil involving the aggressive opening of fraudulent customer accounts. Despite the controversy, Morningstar analysts took a deeper look at Wells' healthier relationships with its customers and has stood by its wide economic moat rating. Polaris Industries Inc. (NYSE:PII) also struggled in September on the heels of competitive pressures and product recalls. Even so, positive outweighed negative performers for the month led by strong gains from Amazon.com (NASDAQ:AMZN) and rail operator CSX Corporation (NYSE:CSX).
International Moats: All-In Gaming Sector Provides Boost
Macau gaming companies led the way once again in September comprising three of the top five performing companies in the International Moat Index for the month: Wynn Macau Ltd. (OTCPK:WYNMF); MGM China Holdings Ltd. (OTCPK:MCHVF); and Sands China Ltd. (OTCPK:SCHYY). Swedish firms were the next strongest contributors to performance led by radiotherapy firm Elekta AB (OTCPK:EKTAF). Elekta along with U.S. Moat Index constituent Varian Medical Systems (NYSE:VAR) make up a virtual duopoly in the radio therapy market. Lloyds Banking Group (NYSE:LYG) continued its post-Brexit slide and Australian telecom firm Vocus Communications Ltd. (OTC:VCMMF) was the leading Index detractor, following deterioration of the Australian telecom sector as a whole.
Index Review Results
Both Indices underwent a quarterly review in September. The U.S.-focused Morningstar Wide Moat Focus Index saw modest turnover with only three companies swapping into the Index, bringing the Index's constituent total to 43. The internationally-focused Morningstar Global ex-US Moat Focus Index experienced a higher level of turnover with 24 companies being replaced: 17 of those companies were removed due to the Index's momentum screen, six were a result of valuation characteristics, and Power Financial Corp. (OTCPK:POFNF) was removed after seeing its economic moat rating downgraded to none. The International Moat Index now holds a total of 74 constituents.
Monthly Index Returns
1-Year Index Returns
Top/Bottom Index Performers
This commentary is not intended as a recommendation to buy or to sell any of the named securities. Holding will vary for the MOAT and MOTI ETFs and their corresponding Indices.
Index performance is not representative of fund performance. To view fund performance current to the most recent month end, call 800.826.2333 or visit vaneck.com.
An investor cannot invest directly in an index. Returns reflect past performance and do not guarantee future results. Results reflect the reinvestment of dividends and capital gains, if any. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
Fair value estimate: the Morningstar analyst's estimate of what a stock is worth.
Price/Fair Value: ratio of a stock's trading price to its fair value estimate.
The Morningstar® Wide Moat Focus Index and Morningstar Global ex-US Moat Focus Index were created and are maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors Morningstar Wide Moat ETF or VanEck Vectors Morningstar International Moat ETF and bears no liability with respect to the ETFs or any security. Morningstar is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index and Morningstar Global ex-US Moat Focus Index are service marks of Morningstar, Inc.
The Morningstar Wide Moat Focus Index consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.
The Morningstar Global ex-US Moat Focus Index consists of companies outside of the U.S. identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.
The S&P 500® Index consists of 500 widely held common stocks covering the leading industries of the U.S. economy.
MSCI All Country World Index ex USA captures large and mid-cap representation across 22 Developed Markets countries (excluding the U.S.) and 23 Emerging Markets countries.
An investment in the VanEck Vectors Morningstar Wide Moat ETF (NYSEARCA:MOAT) may be subject to risks which include, among others, investing in the health Care Sector, investing in the consumer discretionary sector, Investing in the industrials sector, investing in the information technology sector, investing in the financial services sector, equity securities, market, index tracking, authorized participant concentration, short history of an active market/no guarantee of active trading market, trading Issues, replication management, premium/discount, non-diversified and concentration risk, fluctuations in value due to market and economic conditions or factors relating to specific issuers. Medium-capitalization companies may be subject to elevated risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
An investment in the VanEck VectorsTM Morningstar International Moat ETF (NYSEARCA:MOTI) may be subject to risks which include, among others, investing in the financial services sector, investing in the consumer discretionary sector, investing in small- and medium-capitalization companies, investing in foreign securities, investing in emerging market Issuers, special risk considerations of investing in Australian issuers, investing in depositary receipts, cash transactions, equity securities, market, index tracking, authorized participant concentration, short history of an active market/no guarantee of active trading market, trading issues, replication management, premium/discount, non-diversified and concentration risk, fluctuations in value due to market and economic conditions or factors relating to specific issuers. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
The "Net Asset Value" (NAV) of a VanEck Vectors exchange-traded fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF's intraday trading value. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV.
Fund shares are not individually redeemable and will be issued and redeemed at their Net Asset Value (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333. Please read the prospectus and summary prospectus carefully before investing.
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