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
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%.
WisdomTree has grown net income in triple digits in several prior quarters while BlackRock’s earnings are growing at a far more moderate pace. WisdomTree is expected to continue to deliver on the high side. Analysts expect earnings per share to increase 227% this year and 36% in 2014, with revenue growth of 76% and 39%, respectively. BlackRock is expected to grow revenue around 10% this year and the next, while earnings per share will likely rise 17% this year and 13% in 2014.
Bottom line
WisdomTree has been one of the beneficiaries of the ETF growth trends and is expected to benefit in the future. Substantial earnings and revenue growth combined with expanding margins, and the further growth that is expected put its stock price in a very favorable position to grow even more.
The article WisdomTree: A Better Pick Than Its ETFs originally appeared on Fool.com and is written by Dusan Jovanic.
Dusan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
