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WisdomTree Investments Has Returned 33% in the Past Year

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Strong operating performance

WisdomTree Investments’ (WETF) stock has returned approximately 33% over the past year ending November 11. It is currently trading at $20.70. However, the stock has fallen from highs of $26.70 in August 2015 mainly due to macro factors and decline in global equities. The company’s market capitalization reached $2.9 billion with assets under management totaling $58 billion as of October 29, 2015. WisdomTree also reported record earnings in the past couple of quarters with net income up 119% to $23 million in 3Q15 on a year-over-year basis.

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WisdomTree managed to meet analysts’ earnings per share estimates of $0.17 in 3Q15. In 2Q15, the company beat the estimates on higher client flows and margins. The company’s revenues also increased by 71% to $80.8 million in 3Q15 on a year-over-year basis. In the last fiscal year, it managed revenues of $184 million. In comparison, its competitors reported the following numbers:

  • JPMorgan Chase (JPM): $51 billion
  • Bank of New York Mellon (BK): $3.2 billion
  • State Street (STT): $2.7 billion

Together, these companies form 1.7% of the SPDR S&P 500 ETF (SPY).

ETF provider

WisdomTree Investments focuses on ETFs. The company’s offerings include fundamentally weighted funds that track its own indexes, funds that track third party indexes, and actively managed funds.

WisdomTree distributes its ETFs through all major channels within the asset management industry, including brokerage firms, registered investment advisers, institutional investors, private wealth managers, and discount brokers. Most of its index-based funds employ a fundamental weighted investment methodology, which weights securities on the basis of factors such as dividends or earnings. Most other ETF industry indexes use a capitalization-weighted methodology.

The company also offers actively managed ETFs, which are ETFs that are not based on a particular index but are actively managed with complete transparency on a daily basis.

Here are the two major questions we’ll be investigating in this series:

  • Can WisdomTree sustain high earnings growth in upcoming quarters?
  • Will the market revalue WisdomTree?
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