WisdomTree Investments, Inc. (WETF): A Better Pick Than Its ETFs

WisdomTree Investments, Inc. (NASDAQ:WETF)’s ETF’s have been one of the most popular this year. The WisdomTree Japan Hedged Equity has drawn the most inflows of all ETFs this year, and the company has taken in 72% of all Japanese ETF inflows in the first quarter. Those trends are having a very positive effect on WisdomTree Investments, Inc. (NASDAQ:WETF)’s earnings and revenue, which have grown substantially in prior quarters.

Recent developments

WisdomTree Investments, Inc. (NASDAQ:WETF) reported first-quarter net income of $7.8 million, which was 605% higher than last year’s $1.1 million. Revenue grew 53% to $29.3 million from $19.2 million in Q1 2012. Gross profit margin expanded to 72% in the first quarter, up 900 basis points from 63% in the same quarter last year.

Assets under management are growing rapidly, crossing $10 billion in mid-May, and total assets under management are now above $30 billion. The growth can be attributed to its unique business model, as the company has a broad range of fundamentally weighted ETFs as opposed to the traditional capitalization weighted indexes and ETFs.

WisdomTree Investments, Inc. (NASDAQ:WETF)’s most popular fund this year is the WisdomTree Japan Hedged Equity fund. The objective of the fund is to seek investment results that closely correspond to the price and yield performance of the WisdomTree Japan Hedged Equity Index. The index is designed to provide exposure to Japanese equity markets and neutralize the fluctuations of the Japanese yen movements relative to the U.S. dollar. The ETF is up more than 20% year-to-date, and its assets under management crossed $9 billion lately, up from just under $1 billion at the end of 2012.

Management notes that their different views on the market, new asset classes, and innovation are to thank for their substantial growth in the past years. They have achieved their first goal to enter the top five ETF sponsors, ranked by assets under management. The new goal for the company is $100 billion in assets under management. They have a long way to go in order to reach the higher places in the rankings, as the first three companies, Vanguard, State Street, and iShares have AUM north of $200 billion.

The ETF industry is growing fast and taking much of the inflows as opposed to the troubled mutual fund industry. The inability of majority of the mutual funds to beat the indexes and higher fees are some of the reasons the major part of the money is pouring into ETFs, and these trends are expected to continue, and WisdomTree Investments, Inc. (NASDAQ:WETF) is benefiting in a major way. In the seven years that WisdomTree has been an asset manager, mutual funds have lost almost $400 billion while ETFs have taken in $700 billion.

Long way to the top

BlackRock, Inc. (NYSE:BLK)’s iShares is the top ETF sponsor with $600 billion in assets under management. That is 20 times the assets WisdomTree currently has. But what WisdomTree doesn’t have in size right now, it delivers with the substantial growth in assets, revenue, and earnings. WisdomTree’s stock price has also massively outperformed BlackRock, Inc. (NYSE:BLK) in the past years. WisdomTree is up 460% since 2009 while BlackRock’s share price has gained only 34%.