WisdomTree Investments (WETF), the only pure-play ETF provider, is well-positioned to benefit from increased ETF flows, and its growth prospects, product base and strong management team make WETF an attractive play, says Macrae Sykes, Research Analyst at Gabelli & Company, Inc.
“First, it completed a major sale by several insiders, which removed, in my opinion, a technical overhang. Second, it announced a resolution with Research Affiliates in terms of a legacy litigation battle. Third, it changed the back-office agreement with the custodian, which improved its margin going forward. And then, at that time, the valuation was certainly compelling relative to its growth prospects,” Sykes said.
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Sykes says that WisdomTree has since executed very well as it is led by a strong management team, and is benefiting from its solid business model, thus allowing WETF to capitalize on the positive ETF trends in the sector.
“It has had $4.2 billion of net inflows this year — a very rapid growth rate, and the industry trends around its business still continue as ETFs are still a very low percentage of the market in terms of both institutional and retail investor allocation. WisdomTree has a strong product base, an innovative product team and terrific incremental margins just due to the business model. So I think that WisdomTree is very well-positioned and can capitalize on the positive ETF trends and eventually could be a takeover target by a larger financial firm,” Sykes said.
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