SPHQ, QUAL, and MOAT Define Quality Differently. Those Rules Decide What You Own
Three ETFs all claim to own quality businesses, yet only four companies appear in all three portfolios. The definition of quality turns out to matter enormously for what ends up in your account.
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Three ETFs offer different approaches to identifying high-quality businesses. While an investor might expect similar portfolios from these funds, their selection rules differ substantially. Only four companies show up in all three: Applied Materials, Chipotle Mexican Grill, Fortinet, and Zoetis.
The funds are the Invesco S&P 500 Quality ETF (NYSEARCA:SPHQ), the iShares MSCI USA Quality Factor ETF (CBOE:QUAL) and the VanEck Morningstar Wide Moat ETF (CBOE:MOAT). Each one has its own definition of quality. Two use accounting formulas. The third relies on analysts’ judgment about competitive advantage and price.
SPHQ Grades Every S&P 500 Stock on Three Accounting Tests
Invesco says SPHQ’s index scores each S&P 500 stock on return on equity, accruals ratio, and financial leverage ratio, then picks the 100 stocks with the highest quality scores. Financial and real estate companies are scored on return on equity and leverage only, according to the fund’s summary prospectus.
Return on equity rewards profit generated relative to shareholders’ equity. The accruals ratio rewards earnings backed by cash rather than accounting entries. The leverage ratio rewards low debt relative to book value, the company’s net worth on paper.
Invesco weights each stock by its quality score multiplied by its market cap, subject to security and sector constraints. Blending in market cap means larger companies still get larger weights.
Invesco caps SPHQ’s net expenses at 0.15%, matching iShares’ QUAL fee, through at least August 31, 2028. Invesco reports a portfolio turnover rate of 38% for the last fiscal year, a measure of how much of the portfolio gets replaced. Invesco’s prospectus also notes that as of April 30, 2026, the fund had significant exposure to information technology.
QUAL Adds Stable Earnings and a Different Index Provider
According to iShares, QUAL tracks an index of U.S. stocks with high return on equity, stable earnings, and low debt, and charges 0.15%, matching Invesco’s SPHQ. Its benchmark is the MSCI USA Sector Neutral Quality Index.
Broadly, QUAL overlaps with SPHQ on profitability and debt. It includes earnings stability as a test and uses MSCI as its index provider instead of S&P. iShares reports QUAL’s information technology weight at 37.06% as of October 15, 2026.
MOAT Hands the Decision to Morningstar Analysts
VanEck describes MOAT’s holdings as companies with sustainable competitive advantages, according to Morningstar’s equity research, that trade at attractive prices relative to Morningstar’s fair value estimate.
An economic moat is a durable edge, such as a brand or network, that keeps rivals from taking a company’s profits. Fair value is the analysts’ estimate of what a stock is actually worth. Human judgment replaces a formula. A company can score well on accounting tests and still miss MOAT because analysts think its price is too high.
MOAT held 55 stocks as of its June 30, 2026 filing. VanEck lists a net expense ratio of 0.46%, well above the other two. VanEck’s daily holdings as of October 15, 2026 show Meta Platforms on top at 2.95%, followed by Microsoft at 2.86% and Danaher at 2.84%. VanEck reports information technology at 25.68% and consumer staples at 19.88% as of September 30, 2026.
Only Four Companies Pass All Three Rulebooks
Per Invesco and iShares, SPHQ held 100 stocks and QUAL held 125 as of their July 31, 2026 filings. The two formula funds share 49 companies, a point 24/7 Wall St. covered in an earlier comparison.
MOAT stands apart. It shares just 8 companies with SPHQ and 14 with QUAL. Those shared names make up 15.8% of MOAT’s net assets for SPHQ and 23.4% for QUAL. The two formula-driven funds agree with each other far more than either agrees with the judgment-driven fund.
MOAT Trails Both Funds Across Every Period
Price returns as of 11:17 AM ET on October 20, 2026:
| ETF | Price | YTD | 1-Year | 5-Year | 10-Year |
|---|---|---|---|---|---|
| SPHQ | $84.38 | 13.32% | 16.05% | 76.08% | 299.32% |
| QUAL | $225.71 | 14.33% | 17.74% | 71.56% | 293.98% |
| MOAT | $111.60 | 7.76% | 12.67% | 54.42% | 274.43% |
SPHQ and QUAL have tracked each other closely in every period. QUAL leads over the shorter windows, and SPHQ leads over five and ten years. MOAT trails both in all four.
How to Pick the Quality Definition That Fits You
Invesco’s SPHQ and iShares’ QUAL fit investors who want quality measured mechanically from financial statements at a 0.15% fee. MOAT fits investors who want analysts deciding which competitive advantages will last and refusing to overpay for them, at a higher cost.
Holding SPHQ and QUAL together is closer to holding one fund than it looks. Combining either one with MOAT provides real diversification. Each fund’s next SEC holdings filing will show whether MOAT’s thin overlap with the formula funds holds up.
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Ryne Mauck is an investment writer covering exchange-traded funds, retirement planning, and portfolio strategy. Through his work at 24/7 Wall St. and other investment platforms, including Seeking Alpha, he aims to provide clear, research-driven insights that help investors make more informed decisions while maintaining a long-term approach to investing.
Ryne holds a B.Sc. in Finance and an M.A. in Political Science. He is a formerly registered Municipal Advisor Representative and has passed the Series 50, Series 63, and Series 65 exams. His articles are not intended to be, nor should they be interpreted as, financial advice.
