Morningstar Economic Moat Indexes
Targeting Stocks with Durable Competitive Advantages and Attractive Valuations
KEY FEATURES
Morningstar Economic Moat Indexes
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| Shaped by the forward-looking insights of Morningstar’s equity research team Valuations and competitive advantages are assessed based on bottom-up fundamental analysis and cash flow projections. The resulting Morningstar Economic Moat Ratings and Morningstar Fair Value Estimates determine index eligibility. |
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| Combines fundamental research with disciplined portfolio construction While analyst-driven inputs determine eligibility, objective construction rules provide disciplined entry and exit criteria, ensuring consistency and transparency. |
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| Built for investability Index maintenance protocols include liquidity screens, a staggered rebalance schedule, and buffers to mitigate turnover and increase capacity. An equal weighting approach with caps applied at the sector and region levels improves diversification. |
Combining Economic Moats and Valuation Through Index Construction
The moat focus indexes target stocks with durable competitive advantages and attractive valuations. Although the moat focus index approach won’t outperform all the time, it has shown that it pays to be selective over the long term.
Morningstar Economic Moat Rating
What is an Economic Moat?
An economic moat is a durable competitive advantage that allows a company to keep competitors at bay and generate profits over an extended period. This video provides a quick overview of the five sources that build and widen a moat.
A Closer Look
Companies with products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors. This video provides a deeper dive into how Morningstar Equity Research employs the economic moat concept into a comprehensive framework to help investors identify companies that possess an economic moat.
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