As one of the largest issuers of currency hedged exchange traded funds and the only publicly traded pure play ETF issuer, it makes sense that WisdomTree (WETF) has recently seen its shares surge.
Over the past 90 days, shares of the New York-based ETF issuer are up 46% compared to a gain of about 6% for the Russell 2000 over the same period. As the issuer of well-known currency hedged ETFs, such as the WisdomTree Europe Hedged Equity Fund (HEDJ) and the WisdomTree Japan Hedged Equity Fund (DXJ) , WisdomTree’s stock is responding favorably to the stronger dollar. Over the past three months, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) and WisdomTree’s own WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) a re up an average of 6.3%. [Dollar ETFs Look Good in January]
Already this year, HEDJ has added over $718 million in new assets, a total exceeded by just four other ETFs. Those inflows come after the ETF added nearly $5.1 billion in new assets last year, better than all but eight other ETFs. Nine months ago, HEDJ was a $1 billion ETF. It enters Thursday with $6.5 billion in AUM. [A Rush to Europe ETFs]
“We are encouraged by the accelerating flow trends and continue to see WETF as a key flow beneficiary of an appreciating USD ,” said Citigroup analyst William Katz in a note obtained by Barron’s. Katz has a $20 price target on WisdomTree, according to Barron’s. That is nearly 25% above where the stock closed Wednesday.
While HEDJ is proving, as did DXJ in 2013, that shares of WisdomTree can enjoy a positive correlation to the rising greenback, there is arguably more to bull case for the stock.
Last May, WisdomTree announced 10 of its ETFs had over $1 billion in AUM, but only two – DXJ and HEDJ – were currency hedged ETFs. [10 WisdomTree ETFs Top $1B in AUM]
In addition to its leverage to the strong dollar and central bank easing in Europe and Japan, WisdomTree has significant exposure to the ongoing boom in U.S. dividends.
“According to S&P Dow Jones Indices, 971 dividend increases were reported during the fourth quarter of 2014 compared to the 885 increases which were reported during the fourth quarter of 2013. For all of 2014, 3308 issues increased their payments, up 14.3% from the 2895 issues that increased their payments during 2013,” said S&P in a note earlier this month.
WisdomTree sponsors eight U.S.-focused dividend ETFs, several of which have over $1 billion AUM, including the WisdomTree Dividend ex-Financials Fund (DTN), WisdomTree MidCap Dividend Fund (DON) and the WisdomTree LargeCap Dividend Fund (DLN).
WisdomTree Japan Hedged Equity Fund
Tom Lydon’s clients own shares of DTN.