Banking & Finance

Why WisdomTree Is Back!

WisdomTree Investments Inc. (NASDAQ: WETF) may seem like an unusual bull market barometer, considering how many investment management firms there are, but Wisdom Tree is back. The company may be enjoying an earnings pop, but Japan’s surprise extension and expansion of quantitative easing is only adding a boost — with the hope that Europe will begin its own deeper QE-quest being that much more of a boost.

WisdomTree announced its third-quarter results on Friday morning as $0.08 in earnings per share and $47.1 million in revenue. Thomson Reuters had consensus estimates of $0.08 in earnings per share and $46.45 million in revenue. In the third quarter of the previous year, WisdomTree had earnings of $0.11 per share and revenue of $39.63 million.

Shares responded Friday by jumping over 25% to $14.71 in the noon hour. Again, this rise is not entirely attributable to earnings. The Bank of Japan announced early Friday morning that Japan would pursue an extended form a quantitative easing. News of this Japanese quantitative easing was reflected in the Dow Jones Industrial Average when it hit an intraday all-time high. This announcement has special implications for WisdomTree because the firm manages the WisdomTree Japan Hedged Equity ETF (NYSEMKT: DXJ). The exchange traded fund participates in the upside of Japanese stocks without a care in the world about the direction of the yen. The ETF description is as follows:

The Fund employs an investment approach designed to track the performance of the WisdomTree Japan Hedged Equity Index. The Index and the Fund are designed to provide exposure to equity securities in Japan, while at the same time hedging exposure to fluctuations between the value of the U.S. dollar and the Japanese yen. The Index and the Fund seek to track the performance of equity securities in Japan that is attributable solely to stock prices without the effect of currency fluctuations.

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Basically, this ETF will take the Japanese currency out of the equation by hedging it, so the gains will be directly from the Japanese market. The ETF had $10.3 billion in assets as of Friday.

There are hopes and expectations that the European Central Bank (ECB) might be looking to pursue quantitative easing as its interest rates have been taken down into negative territory. WisdomTree has another ETF that invests in the European markets and hedges against currency fluctuation between the euro and the U.S. dollar — WisdomTree Hedged Equity ETF (NYSEMKT: HEDJ). The ETF had $3.1 billion in total assets as of Friday. The hope is that this would also win under ECB-led quantitative easing, without a care about the direction of the euro. WisdomTree described the European ETF as follows:

The Fund will seek to track the performance of the WisdomTree Europe Hedged Equity Index. The Index and Fund are designed to have higher returns than an equivalent non-currency hedged investment when the value of the U.S. dollar is increasing relative to the value of the euro, and lower returns when the U.S. dollar declines against the euro. The Fund will invest in stocks of European companies with significant revenue from exports.

WisdomTree has a consensus price target of $14.06 and a 52-week trading range of $9.11 to $18.50. Its market cap is almost $2 billion.

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