2018 Investment Series Post 2

Everyone loves payday. Just like everyone else, once I get that sweet deposit in the bank it starts burning a hole in my pocket. Before much time I am ready to blow it all on a shopping spree. My store of choice is the stock market, and I’m shopping for the best deals on companies. Here is what I dropped my $1,000 on this Friday, January 19th.

Wisdom Tree Investments (WETF)

The second pick of the Let’s Be Millionaires investment series goes to Wisdom Tree Investments (WETF). Here is an excerpt from their about page:

“WisdomTree launched its first ETFs in June of 2006, and is currently the industry’s seventh largest (by assets under management) ETF provider. WisdomTree sponsors distinct ETFs that span asset classes and countries around the world. Categories include: U.S. and International Equity, Currency, Fixed Income and Alternatives. WisdomTree pioneered the concept of fundamentally weighted ETFs and active ETFs and is currently an industry leader in both categories. WisdomTree is the only publicly traded asset manager exclusively focused on the ETF industry.”

In case you are not familiar with the term “ETF” it stands for “Exchange-Traded Fund.” Essentially, ETFs trade like stocks even though they are comprised of multiple underlying assets. They also typically have higher liquidity and lower fees when compared to mutual funds. If you are interested in learning more about ETFs I suggest this Investopedia article.

Aside from loving the irony of investing in a company that makes its money from selling investment products, there are a few reasons that Wisdom Tree Investments (WETF) is picking up my $1000 this go around.

About The Stock

WETF stock has been on a solid uptrend since September 2017, rallying from the $8 range to just under $13 a share. WETF currently has a P/E multiple of 59 which is fairly steep, however the forward P/E sits at around 32 showing an expectation of earnings growth over the next year. The stock also has a 2.5% dividend which means I can expect to receive $25 worth of payments over the course of a year for a $1000 investment.

With a market cap of 1.75 billion dollars Wisdom Tree Investments falls into the small-cap category. It could also be categorized as a financial stock, a domestic stock, and a growth stock.

The Speculation

Ever since ETFs came onto the scene they have been stealing market share from mutual funds. I fully expect that trend to continue as people begin to understand the low-cost nature of ETFs, as well as the impacts that trading in assets with low liquidity can have on returns. Wisdom Tree has also released some popular hedged ETFs, in which they allow investors to invest in the stocks of another country, and remove the exchange rate risk at the same time. I believe that more and more people will start to look outside of the United States for equity investments, and Wisdom Tree Investments is strongly positioned to serve these investors with their products.

Furthermore, we are currently in the later stage of a long running bull market. The later stage in such a market is typically characterized by the large inflows to the market (stock/fund purchases) from retail investors (you and I). Since Wisdom Tree Investments caters to the retail investor with its products, I would not be surprised to see an increase in their assets under management, as well as their earnings over the next one to two years.

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2018 Investment Series Post 1

 

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