Slappy White

WisdomTree: Riding the ETF Wave

What was that about trees growing to the sky?

WisdomTree: Riding the ETF Wave

Overhead is a valid point in WSDT's favor. However, I think it's besides the point.

WSDT might or might not get to $160 Billion in assets. However, right now, it is at $1 Billion. Even assuming the full expense ratio is 0.5% goes to the shareholders (which would be silly), that would be $5 Million relative to a market cap of $700 Million.

By comparison, Mr. Suria points out that Amvescap's purchase of Powershares could, if targets are hit, be worth $730 Million. That is on 6X the assets under management relative to WSDT.

I have no idea whether WSDT will maintain its rate of growth. However, I am happy to let others find out, one way or the other. I think there is an irony in a company whose share price is driven solely by speculation hawking a conservative, passive investment approach based on dividends and earnings. I'm going to venture a guess and say that I don't think WSDT will be added to any of WSDT's funds anytime soon.

I'm also sorry for people who bought at $9 a few days ago only to lose 15%. I have the sneaking suspicion that they might ultimately have been happier putting their money in WSDT's DTD fund rather than WSDT itself. For disclosure's sake, I hold shares of DTD and have no interest in WSDT.

WisdomTree: Riding the ETF Wave

Here's my own back of the envelope analysis using numbers from Yahoo Finance:

Assets under Management: $ 1 billion, Market Cap: $ 700 Million

If you think about it, to say Wisdomtree is fairly valued, you have to assume a value of $0.70 for every dollar *under management*. Since the "conservative" estimate is that they charge 50 basis points on AUM or $ 0.005 per $ 1.00 under management, you get to the point where this is just silly. Subtracting money paid to "advisors" for lending their good name to the operations of a discredited newsletter operator, and whatever Jono is skimming, and you get to the absurd.

Add to this that there are a dozen competitors in the market already and probably another hundred waiting in the wings.

For context, Janus, with $ 158 Billion under management, has a market cap of $ 4 Billion.

The people who are making the big money are the ones who have a basis in the cents, not at $ 9.00.

YMMV