WisdomTree Powers Ahead, Shares up 85% This Year; why the ETF company is one of the brightest spots in the asset management industry
April 27, 2013 Leave a comment
April 26, 2013, 10:25 A.M. ET
WisdomTree Powers Ahead, Shares up 85% This Year
By Brendan Conway
The ascent of WisdomTree Investments (WETF) continues. This morning’s earnings report gives a few more signs why the company is one of the brightest spots in the entire asset management industry. The only publicly traded firm selling ETFs and ETFs alone reported a 53% jump in total revenue last quarter and a six-fold rise in net income. The period’s 60% growth in assets under management from a year earlier is more than twice the pace of the ETF industry’s 27% growth during 2012.
It’s not as if the company is sacrificing profitability to build up assets. WisdomTree’s average ETF advisory fee held steady at 0.54%. Costs rose, but gross margins still expanded to 72% from 63% a year earlier. Investors have responded. Shares are up nearly 85% year-to-date, including a 5% jump this morning, to $11.43. The trading makes something of a farce of my argument two months back that it was time for WETF’s stock — then ahead by a mere 50% — to cool off. How much farther can the stock go? Sterne, Agee & Co. analysts Jason Weyeneth andAlex Levine have a $14 price target, which is another 22% from Friday morning levels. The pair didn’t see anything unexpected in the company’s costs for the period. Asset levels are pretty easy to spot well in advance of the quarterly report, since the ETF company’s AUM can be calculated every day.
It’s still true that a lot of things have gone right lately. For any fund company, factors outside the firm’s control can take away the good things they’ve given with little warning. WisdomTree Japan Hedged Equity fund (DXJ) is up to $7.6 billion in assets as of this morning — it’s the top asset-gathering ETF in the entire marketplace this year, with $5.2 billion of the money arriving since January. Investors with an interest in quick and easy exposure to Japan’s stock market have picked the fund that reacts best to a weak yen and the Bank of Japan’s dramatic stimulus plans.
But if the yen strengthens, or if the country’s policymakers otherwise flinch in the push for more aggressive quantitative easing, the Japan ETF money could leave as quickly as it arrived. ETF users can be awfully fickle; it’s one of the great draws of the structure that you can come and go with relative ease.
WisdomTree Emerging Markets Equity Income Fund (DEM) and WisdomTree Emerging Markets Local Debt Fund (ELD), to take two other big sellers, don’t face the same risk. But they, too, have their own risks, for instance, if interest rates rise. There’s the intense competition in the ETF business to think about, to boot.
No matter for now. Investors are enjoying watching WisdomTree grow taller.
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