ETFs of the week: Wide Moat (MOAT) and Cash Cows (COWZ)

Exchange Traded Funds (ETFs) continued seeing strong inflows this year, with S&P 500 funds like those by Blackrock and Vanguard seeing strong flows. Blackrock’s IVV added over $5 billion in funds while Vanguard’s VOO added $3.7 billion. 

As I have written before, these funds are closing in on the popular SPDR S&P 500 (SPY) fund and are expected to pass it this year. The other top ETF inflows last week were Invesco QQQ, Vanguard Total Stock Market ETF (VTI), and the iShares 20+ Year Treasury Bond ETF (TLT.

Our ETF picks of the weak are the VanEck Wide Moat (MOAT) and the Pacer US Cash Cows 100 (COWZ) ETFs. 

VanEck Wide Moat ETF (MOAT)

The VanEck Wide Moat ETF is one of the most popular funds among value investors. It is a leading fund with over $14 billion in assets and an expense ratio of 0.47%.

While the fund has had outflows in the past two straight months, it has added over $638 million this year. This fund invests in companies that have a considerable moat in their respective industries.

Most companies in the fund are industrials, health care, technology, and consumer defensive. The biggest company in the Wide Moat ETF is Altria, one of the biggest cigarette companies in the world. Altria owns brands like NJOY, Philip MorrisUSA, Helix Innovations, and US Smokeless Tobacco. It has also made investments in ABInBev and Cronos Group.

Altria and other tobacco companies are known for their high dividends and moats in their sector. In Altria’s case, it has a dividend yield of almost 8%, higher than the 10-year government bonds. 

The other big name in the MOAT ETF is Adobe, one of the biggest companies in the cloud computing sector. Its products include the likes of PhotoShop, InDesign, Acrobat, and Illustrator. 

While Adobe has a wide moat, it is facing competition from the likes of Canva and Figma. Still, it has a big moat and analysts expect its momentum will continue. 

The other top companies in the MOAT ETF are International Flavors and Fragrances, Campbell Soup, Pfizer, Gilead Sciences, and MarketAxess. It has 56 companies in its portfolio, with the first ten accounting for 26.6% of the total fund. 

MOAT is a good fund because of its historic performance. It has risen by 80% in the past five years and 185% in the past decade. 

MOAT ETF analysis

Technically, there are signs that the MOAT ETF is at risk. On the chart above, we see that the fund has found substantial resistance at $89.92, where it has failed to cross above three times since April 1st. This means that the fund has formed a triple-top chart pattern, which is a popular bearish sign. 

On the positive side, this pattern can also be an ascending triangle, which is often a bullish sign. Therefore, more upside will only be confirmed if it rises above the key resistance at $90. 

Pacer US Cash Cows 100 ETF

As I have written before, the Pacer US Cash Cows 100 ETF is one of my best funds in the market. It is a fund that focuses on the most important aspect of any business: free cash flow (FCF).

FCF refers to any funds that remain in a company after it spends its profits. Companies with higher FCFs can then deploy these funds into buybacks, dividends, and acquisitions. 

The COWZ ETF is made up of 100 companies, with most of them being in the consumer cyclical industry. It is followed by companies in technology, energy, industrials, and health care. 

The biggest companies in the fund are Cheniere, Gilead Sciences, Lennar, Diamondback Energy, and EOG Resources. 

This ETF has dividend yield of about 2% and a track record of performance. It has risen by over 92% in the past five years and outperformed some of the most popular ETFs in the market. 

COWZ ETF analysis

On the daily chart, we see that the COWZ ETF recently bottomed at $53.15 on July 5th and has bounced back to $5. It has also moved above the 23.6% Fibonacci Retracement point and risen above the key resistance point at $55.90, its highest point on May 15th. 

The ETF remains above the 50-day and 100-day Exponential Moving Averages (EMA). However, it ha formed a shooting star chart pattern, which is a popular bearish sign. The Relative Strength Index (RSI) has pointed downwards too. 

Therefore, the ETF will likely remain under pressure this week as investors focus on the earnings season. Some of the top companies expected to publish their results are Alphabet, Tesla, IBM and ServiceNow. In most cases, these earnings have an impact on the stock market.  In COWZ case, more upside will be confirmed if it rises above this month’s high of $58.