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Buy ETFs AND Their Sponsoring Companies

ETFs are benefiting the stocks that sponsor them

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Shares of BLK, IVZ, and STT are great, but they aren’t necessarily “pure ETF” players. After all, those companies have plenty of assets in other investment businesses. For investors looking to play the straight growth in ETFs, upstart WisdomTree Investments (WETF) is the place to be.

WisdomTree185Focusing on “fundamental” indexing, WisdomTree’s niche ETF business is growing like weeds.

WisdomTree offers 55 ETFs — such as the uber-popular WisdomTree Japan Hedged Equity (DXJ) — that use dividends, earnings or other factors to weight and create the index. These smart beta products offer the opportunity for outperformance versus traditional indices, and investors have been snapping them up. Inflows into WETF’s products for the third quarter rose 12% to reach $31.5 billion in total.

The beauty of that number is that WETF charges more for its ETFs — due to the special indexing — versus a bread-and-butter S&P 500 fund.

Those higher charges have helped WisdomTree triple its profits for the quarter. WisdomTree managed to earn $15 million or 11 cents per share for the last three months. That amount also managed to beat analysts’ predictions by a wide margin.

WETF shares are up a staggering 130% this year, but continued inflows should benefit the smaller issuer.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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