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Exchange-Traded Fund (ETF) assets have been surging lately as more investors embrace this product type for their portfolios. While the space continues to be dominated by iShares, PowerShares, and State Street, there have been several smaller companies which have begun to make inroads in the market, such as upstart WisdomTree Investments (WETF - Snapshot Report).
This New York-based company has over $20 billion in assets under management in its lineup of funds which stretch across asset classes into equities, bonds, and currencies. However, it should be noted that the firm does things a little differently when compared to other ETF providers in both its funds’ makeup and their focus.
Instead of weighting stocks by market capitalization, the firm often utilizes a dividend or earnings weighting methodology for its products, something that is virtually unseen in other corners of the fund world. This unique approach appears to be paying off for this small company, as both assets under management and the firm’s overall earnings have been soaring.
In fact, just one year ago, the company earned just one cent per share and it is expected to earn four this quarter. The full year picture is also rosy, with the year ago figures showing EPS of two cents a share compared to projections of eight cents a share this year.
Clearly, the company is expected to post some serious growth in its overall earnings picture thanks to its booming ETF business which is seeing strong inflows. Just over the past month, the company has seen close to $2 billion move into its lineup of ETFs (largely in (DXJ - ETF report) and (DEM - ETF report). This represents a big chunk of the firm’s total asset picture which is helping to boost analyst sentiment for this year and the next.
This is best reflected in the analyst revision trend for WETF over the long term. The firm has six analysts following its stock and it has seen four revisions higher in the past month for both next quarter and next year. Furthermore, not a single analyst has revised the forecast lower for either of these time periods, suggesting complete agreement.
Investors should note that the PE for WETF is a bit high when compared to the industry average, while unlike most financial firms, it does not pay a dividend. Additionally, WETF has a market cap of just $1 billion so it is certainly capable of very volatile periods.
Still, the earnings picture appears to be very strong for WETF and investors are certainly embracing its product in droves. Growth is also expected to be quite high, so for those willing to take on some volatility this could be an interesting choice.
This is especially true considering that we currently have WETF as a Zacks #1 Rank or ‘Strong Buy’ stock, suggesting strength over the next few months. Add this on to a Zacks Recommendation of Outperform along with a strong Zacks Industry Rank, and investors may have a winner on their hands with this often overlooked investment management firm.
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