Launched on 10/04/2022, the VanEck Morningstar SMID Moat ETF (SMOT) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Blend category of the market.
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
The fund is sponsored by Van Eck. It has amassed assets over $348.23 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. Before fees and expenses, SMOT seeks to match the performance of the MORNINGSTAR US SML-MID CAP MOAT FOCUS ID.
The Morningstar US Small-Mid Cap Moat Focus Index tracks the overall performance of small and mid-cap companies with sustainable competitive advantages and attractive valuations.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for SMOT are 0.49%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.36%.
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For SMOT, it has heaviest allocation in the Consumer Discretionary sector --about 20% of the portfolio --while Industrials and Healthcare round out the top three.
When you look at individual holdings, Hess Corp (HES) accounts for about 1.50% of the fund's total assets, followed by Cnh Industrial Nv (CNH) and Corteva Inc (CTVA).
SMOT's top 10 holdings account for about 14.14% of its total assets under management.
The ETF has lost about -12.71% and is down about -2.81% so far this year and in the past one year (as of 04/21/2025), respectively. SMOT has traded between $28.40 and $37.49 during this last 52-week period.
The fund has a beta of 1.28 and standard deviation of 19.35% for the trailing three-year period. With about 107 holdings, it effectively diversifies company-specific risk.
VanEck Morningstar SMID Moat ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $60.98 billion in assets, Vanguard Total Stock Market ETF has $417.46 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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VanEck Morningstar SMID Moat ETF (SMOT): ETF Research Reports
Hess Corporation (HES) : Free Stock Analysis Report
CNH Industrial N.V. (CNH) : Free Stock Analysis Report
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
Corteva, Inc. (CTVA) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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