As one of the largest issuers of currency hedged exchange traded funds, WisdomTree Investments Inc. (NASDAQ:WETF) is affected by the dollar's movement.
Coming into Thursday, no ETF had more new assets this year than the WisdomTree Europe Hedged Equity Fund (NYSE:HEDJ) and the WisdomTree Japan Hedged Equity Fund (NYSE:DXJ) was also found among the top 10 asset-gathering ETFs on a year-to-date basis. WisdomTree had $60.7 billion in assets under management as of August 20. HEDJ and DXK combined for $35.7 billion in assets asof August 25.
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So with the U.S. Dollar Index down over the past month, it probably is not surprising that shares of WisdomTree have traded lower as well. However, WisdomTree's 13.6 percent loss over that period is perhaps a case of overshooting the dollar's modest downturn, but the good news, at least in the eyes of one analyst, the pullback in WisdomTree's stock is a legitimate buying opportunity.
The headwinds from recent macro volatility are transitory and provide an attractive entry point for WETF not seen in a year. Long-term fundamentals remain intact as expectations for a stronger USD on divergent global central bank policies will continue to drive outsized growth in currency hedged products. Concern around recent insider sales is a non-event, and the potential of the company's suite of rising rate products remains underappreciated. Reiterate Buy, said Jefferies in a note out Thursday.
Points To Consider
There are some interesting points that underscore Jefferies' enthusiasm for WisdomTree, the fifth-largest U.S. ETF issuer. On an anecdotal level, the title of the aforementioned note is Time to Back up the Truck. In terms of hard predictions, Jefferies has a $31 price target on WisdomTree, implying upside of 58 percent from where the stock trades at this writing.
As Barron's notes, Jefferies' take on WisdomTree significantly differs from that of Citigroup, which on Wednesday slapped a sell rating on the stock while paring its price target by 50 percent.
Part of the reason for Citi's bearish view on WisdomTree is recent insider selling, which Jefferies says is a non-event.
In early August, Chairman Michael Steinhardt, WETF's biggest shareholder reduced his stake from approximately 10.2% to 8.9%, while CFO Amit Muni sold approximately half his stake. We view these transactions as non-events as each is backed by specific personal circumstances. We note Chairman Steinhardt, who provided the launch capital for WETF, has been an ongoing seller for 2 years now due to estate planning. We also note there are no recent sales by CEO Jonathan Steinberg, said Jefferies.
Said another way, it is important to remember that insiders sell for multiple reasons and not all of those reasons are bad. Maybe the kids need to go to college. Maybe the significant other wants a Birkin bag. Whatever the reason may be, not all insider sales signal dwindling confidence in a company's stock.
Investors sure like what Jefferies had to say about WisdomTree as the stock was up almost 9.2 percent on heavy volume in late trading Thursday.
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