Moat Index Keeps Tech in Check, Value in Focus

Core Insights - The September Moat Index review has reduced tech exposure, added new companies, and maintained a strong value tilt, reflecting a contrarian stance in the current market [1][2][5]. Moat Index Review Highlights - The Morningstar Wide Moat Focus Index underwent its quarterly review on September 19, 2025, targeting attractively priced, high-quality U.S. companies [2][4]. - The tech sector weight in the Moat Index decreased by approximately 8%, resulting in a 13% underweight compared to the S&P 500 Index, marking the largest underweight since the start of 2025 [5][6]. - A total of 17 companies were added and removed from the Moat Index, including five first-time entrants: Airbnb, Broadridge, Copart, Entegris, and Jack Henry & Associates [5][6]. - The Moat Index's price-to-fair value ratio decreased from about 0.87 to 0.82, indicating an 18% discount to fair value, contrasting with the S&P 500 Index, which is currently 4% overvalued [5][6]. Sector and Style Exposure - The Moat Index continues to focus on undervalued application software and semiconductor companies, while the exposure to the Magnificent 7 companies is significantly underweight at 4.3% compared to 34.2% in the S&P 500 Index [5][6]. - The value style remains a notable overweight relative to the broader market, a trend that has persisted for nearly two years despite market volatility [6].