Fund Shares Archives

Election Results Benefit U.S. Moats

As global financial markets continue to sort through the long-term impact of Donald Trump’s U.S. presidential victory on Tuesday, November 8, 2016, one thing is certain: there were both winners and losers in the immediate aftermath. Among U.S. moat companies, several sectors and individual stocks wavered in the week preceding the election and reversed course in the days that followed. Overall, moat companies that benefited from the election outweighed those that suffered. Election Results Benefit U.S. Moats

Positive Reversal of Fortune on Trump Victory

Throughout the week leading to the election (November 1 to November 8), several stocks within the U.S.-oriented Morningstar® Wide Moat Focus IndexSM (the “Index”) (MWMFTR, or “the U.S. Moat Index”) posted unimpressive returns. Companies from the healthcare sector such as Allergan plc (AGN), AmerisourceBergen Corp. (ABC), McKesson Corp. (MCK), and Amgen Inc. (AMGN) struggled with the prospects of potentially higher regulation and price controls under a possible Clinton administration. Following Trump’s election, these companies recovered significantly. Banking, which also stands to benefit from potentially reduced regulations and higher interest rates under Trump, received a boost led by Index constituent Wells Fargo & Co. (WFC).

Five Largest Reversals in Pre-Election versus Post-Election Performance

Morningstar Wide Moat Focus Index

Pre-Election Period: 11/1/16 – 11/8/16; Post-Election Period: 11/9/2016 – 11/10/2016

Click to enlarge. Source: Morningstar; FactSet. Past performance is no guarantee of future results. Not intended to be a forecast of future events or investment advice.

Tech Companies among those Hurt by Threat to Skilled Foreign Workers

On the flip side, several U.S. Moat Index constituents struggled following the election. Amazon.com, Inc. (AMZN), Starbucks Corp. (SBUX), Western Union Co. (WU), and Salesforce.com (CRM) were among the negatively affected stocks. Immigration policy uncertainty appears to be impacting tech companies who rely on foreign skilled employees or that have significant Mexican and Latin American business ties.

Moat Companies Positioned for the Long Term

Although many of these post-election trends may be short lived, the idea of investing in attractively priced quality companies remains a long-term proven strategy. Year to date through November 15, 2016, the Morningstar Wide Moat Focus Index has outperformed the S&P 500® Index by 12.43% (21.17% vs. 8.74%). Taking an even longer view, the Index has bested the S&P 500 Index for the five years ended November 15, 2016 (15.99% vs. 14.05% on an annualized basis), according to Morningstar data.

The VanEck Vectors™ Morningstar Wide Moat ETF seek to replicate before fees and expenses, as closely as possible, the price and yield performance of the Morningstar Wide Moat Focus Index.

Index performance is not representative of fund performance. For fund performance visit vaneck.com/moat.

The Morningstar Wide Moat Focus Index consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are the most 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.

The Morningstar® Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors Morningstar Wide Moat ETF and bears no liability with respect to the ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index is a service mark of Morningstar, Inc.

This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.

The information herein represents the opinion of the author(s), but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

Any indices listed are unmanaged indices and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in a fund. An index’s performance is not illustrative of a fund’s performance. Indices are not securities in which investments can be made.

An investment in the VanEck VectorsTM Morningstar Wide Moat ETF (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.

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.

Moativated Investing – A History of Outperformance

Moativated Investing – A History of Outperformance. Long-term outperformance defines the track record of Morningstar’s success in identifying quality ”moat” companies with sustainable competitive advantages that are also trading at attractive valuations. Since its live inception in 2007, the Morningstar® Wide Moat Focus IndexSM has outperformed the S&P 500® Index by more than four percentage points each year, as shown in the chart below.

Morningstar’s Economic Moat Rating

Morningstar first began rating companies in 2002 according to the strength and longevity of their competitive advantages. Nearly fifteen years later, Morningstar’s equity research process remains rooted in the core belief that quality companies positioned to maintain one or more competitive advantages well into the future are best positioned for long-term success. The quality of these companies is reflected in Morningstar’s Economic Moat Rating. Morningstar’s unique Economic Moat Rating system helps investors identify how likely a company is to keep competitors at bay for an extended period. The highest rating, a wide economic moat, signifies Morningstar’s belief that the company can sustain its competitive advantage for at least 20 years into the future, which is no small feat in today’s ultra-competitive environment.

Fair Value Represents A Company’s Long-Term Intrinsic Value

Another key component to Morningstar’s moat-investing equity research approach is its valuation process. Morningstar equity analysts assign a fair value estimate to each company based on how much cash it believes the company may generate in the future. The fair value represents a company’s long-term intrinsic value. Of course, stocks may trade above or below the company’s underlying fair value. The key is to identify those companies that are attractively priced at the time of investment. VanEck VectorsTM Morningstar Wide Moat ETF (MOAT) is the only U.S. ETF that seeks to track the Morningstar® Wide Moat Focus IndexSM (the ”Index”), a benchmark that combines Morningstar’s measure of quality with their valuation framework. The Index’s approach to identifying U.S. companies with wide economic moats that are attractively priced has resulted in long-term outperformance versus the broader U.S. equity market, and provided a unique way for investors to invest in quality companies.

U.S. Moat Investing Has Provided a Long-Term Performance Advantage

Cumulative Index Returns 2/14/2007 to 9/30/2016 (click to enlarge) Source: Morningstar; FactSet. Index performance is not representative of Fund performance. Fund performance current to the most recent month-end can be found at www.vaneck.com/moat. Past performance is no guarantee of future results.

Important Disclosures

Fair value estimate: The Morningstar analyst’s estimate of what a stock is worth. The Morningstar Wide Moat Focus Index consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are the most 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. The Morningstar® Wide Moat Focus IndexSM was created and is maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors Morningstar Wide Moat ETF and bears no liability with respect to the ETF or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index is a service mark of Morningstar, Inc. This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction. The information herein represents the opinion of the author(s), but not necessarily those of VanEck, and these opinions may change at any time and from time to time. Non-VanEck proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Historical performance is not indicative of future results. Current data may differ from data quoted. Any graphs shown herein are for illustrative purposes only. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck. Any indices listed are unmanaged indices and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in a fund. An index’s performance is not illustrative of a fund’s performance. Indices are not securities in which investments can be made. An investment in the VanEck VectorsTM Morningstar Wide Moat ETF (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. 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.

China: A $12 Trillion Economy Not to be Ignored

China remains an important part of the world economy. China: A $12 Trillion Economy Not to be Ignored. While it may not be posting the double-digit gr owth numbers of a decade ago, we believe the country continues to offer interesting investment opportunities. Although recent economic growth rates have been in the single digits (6.90% in 2015 as shown in the chart below), in absolute terms this growth is extraordinary given that China’s economy is far bigger than it once was. What was China’s $1 trillion sized-economy in 2000 is now 12 times larger at more than $12 trillion based on gross domestic product (GDP), putting China just behind the U.S. ($19 trillion).1

Concern over Capital Outflows Abates

We continue to believe that when evaluating any investment in either the emerging markets or any global allocation of assets, China needs to be considered. Although current concern surrounding China’s capital outflows may have decreased, there continues to be net depreciation pressure on the Renminbi. However, in some ways, mild, engineered depreciation versus a basket of currencies, while keeping a lid on capital outflow pressures, may represent a positive outcome for China. Market concern has tended to focus more on the rapid increase in leverage that has been seen in China since the global financial crisis. Although we agree that this is a significant issue that will likely necessitate some hard decisions, we think that there are serious differences in the nature of that debt and the management of the economy that could prevent a systemic crisis in the foreseeable future.

Debt Burden is Larger for SOEs

Much of the debt risk concern is around state owned enterprises, or SOEs. Privately owned enterprises tend not to carry as much debt. According to estimates in a paper published in June 2016 from Shi Kang, an associate professor at Chinese University of Hong Kong, private companies have cut debt to 53% of assets in 2013 from 58% in 2007, while SOEs have seen those figures jump to 62% from 55%.2

China’s New Economy Transition

Small and medium enterprises (SMEs) remain at the center of the narrative as China transitions from an “old” production-driven model to the “new” consumer and service-led economy. In this context, we believe VanEck Vectors™ ChinaAMC SME-ChiNext ETF (NYSE Arca: CNXT®) provides not only exposure primarily to China’s market for innovative, non-government owned companies, but also to the very sectors that are increasingly recognized as underpinning the growth of the country’s “New Economy.” CNXT gives investors a liquid, transparent way to gain access to some of these growing companies.

China GDP Absolute Growth and Growth Rate (2000 – 2015)

(Click to enlarge)

Source: World Bank. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue.

IMPORTANT DEFINITIONS AND DISCLOSURES

1 Estimated; Data: IMF, World Economic Outlook; Updated Feb. 11, 2016
2 Bloomberg: China Private Firms Show Way Out of Debt Trap for State Giants.

Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders during one year.

CNXT is subject to risks which include, among others, those associated with investments in Chinese securities, particularly A-Shares, adviser and sub-adviser risk, risk of the RQFII regime, political and economic instability, inflation, confiscatory taxation, nationalization, expropriation, and market volatility, all of which may adversely affect the Fund. 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. Small- and 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.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will generally decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

May Acquisitions Help US Moats

For the Month Ending May 31, 2016 May Acquisitions Help US Moats

Performance Overview

U.S. moat-rated companies continued to impress in 2016 with another strong relative performance month in May. The U.S.-oriented Morningstar® Wide Moat Focus IndexSM (MWMFTR) topped the S&P 500® Index (2.69% vs. 1.80%) for the month and maintained its relative performance year-to-date (15.07% vs. 3.57%). By contrast international moats fared less well in May with the Morningstar® Global ex-US Moat Focus IndexSM (MGEUMFUN) lagging the MSCI All Country World Index ex USA (-2.09% vs. -1.69%).

US Domestic Moats: May M&A

News of Bayer’s (BAYN GR) bid to buy wide moat agrichemical giant Monsanto Company (MON US) boosted shares of MON US late in the month. This came on the heels of Abbott Laboratories’ (ABT US) announcement of its intent to buy wide moat St. Jude Medical (STJ US) which propelled the stock performance of STJ US in April. Healthcare companies continued their strong performance for MWMFTR in May led by McKesson Corp (MCK US) and Allergan (AGN US). The industrials sector was the leading detractor for the month with notable poor performance from rail companies CSX Corp (CSX US) and Norfolk Southern Corp (NSC US).

International Moats: Financials in Flux

As with U.S. moats in May, internationally focused MGEUMFUN’s exposure to healthcare companies helped boost performance. However, the Index was unable to overcome the negative performance contributions from industrials and financials companies, ending the month down 2.09%. Canadian banks struggled in May as many have been forced to deal with credit losses related to the oil & gas industry. Overall, construction firm China State Construction International Holdings Limited was the poorest Index performer in May.

Special Update: Morningstar Index Enhancements

As previously announced, Morningstar will implement enhancements to the index methodology for MWMFTR and MGEUMFUN effective June 20, 2016. The indices will continue to be built on Morningstar’s equity research which identifies sustainable competitive advantages at attractive valuations, but will aim to reduce turnover, broaden diversification, and mitigate unintended sector concentration.

Moat Investing

Moat Investing provides key insights and performance trends impacting global moat investing based on Morningstar equity research. U.S.-focused MOAT and internationally focused MOTI offer investors global exposure to Morningstar’s moat methodology and valuation principals.

Important Disclosure

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 IndexSM and Morningstar® Global ex-US Moat Focus IndexSM 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 20 U.S. companies identified as having sustainable, competitive advantages and whose stocks are the most attractively priced, according to Morningstar. The Morningstar Global ex-US Moat Focus Index consists of 50 companies outside of the U.S. identified as having sustainable, competitive advantages and whose stocks are the most 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 (MOAT) may be subject to risks which include, among others, 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 Vectors Morningstar International Moat ETF (MOTI) may be subject to risks which include, among others, 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. 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.