Expectations of $2B-$5B of quarterly inflows "leave little room for error" for WisdomTree (WETF -6.4%), says Citi's William Katz, who cut the stock to a Sell this morning. Stripping out the spectacular (and likely unrepeatable) success of the Japan Hedged Equity Fund, WisdomTree has hit this range just once in the last two years.
There are better values in asset management elsewhere, says Katz, noting double-digit organic growth at Waddell and Reed (WDR -0.5%) and Artisan Partners (APAM -0.8%), but at far lower P/Es than WisdomTree's 39x. Then there's Invesco (IVZ -0.5%) - which runs PowerShares ETFs - enjoying margins nearly as large as WETF, but with a P/E ratio more than 50% smaller.
Is WisdomTree - the only "pure play" ETF stock - deserving of a buyout premium? Maybe not, suggests Katz, noting insider selling, continued heavy investment in the business, and acquirers more interested in "seeking de novo growth in the passive arena."