WETF (WisdomTree Investments Inc.) has built a formidable presence in the ETP marketplace in recent years in terms of product offerings and assets gathered under management.
Not only do we closely follow the firm’s ETF offerings, especially the largest ones like HEDJ (WT Europe Hedged Equity, Expense Ratio 0.58%, $19.6 billion in AUM), DXJ (WT Japan Hedged Equity, Expense Ratio 0.48%, $17.3 billion in AUM), DEM (WT Emerging Markets Equity Income, Expense Ratio 0.63%), EPI (WT India Earnings, Expense Ratio 0.83%, $2.4 billion in
AUM), and DLN (WT LargeCap Dividend, Expense Ratio 0.28%, $2 billion in AUM), but we also watch the company’s publicly traded stock, ticker WETF.
Not slated to report quarterly earnings until 7/31/15 before the open, we have seen some interesting options trading lately in the name, consisting of June 18 strike puts that have traded in exceptional size (>45,000 contracts versus open interest in the line of less than 900 contracts).
It is worth noting that these June options clearly expire before the company’s next scheduled quarterly earnings release, so this is likely not an earnings play but instead a speculative trade predicated on a potential pullback in the stock. WETF had been on a dour losing streak through the middle of April until yesterday and then a strong follow up today, reclaiming more than 10% from its intraday low of $18.34 last Friday.
Trading volume was exceptionally heavy in the stock yesterday as well and will likely be similar today as the stock attempts to creep back above its 50 day MA, which was breached in late April and the stock has not looked back.
Why is the stock bouncing after some put activity that we noticed from likely nervous holders if not outright bearish speculators? We do see a few sell-side analyst positive affirmations of the stock on the recent weakness, and the stock has reacted positively, at least in the past two sessions including today.
However, asset flows have been good to WETF not only in recent quarters but recent years thanks to the mega popularity of “Currency Hedged” ETFs and the growing institutional and retail usage of such products. Every issuer that operates in that space, for it is not only WisdomTree but also iShares and Deutsche Bank specifically to name the larger players in that particular ETF niche, that are reliant on “Rising U.S. Dollar concerns”, which would of course equate to foreign currency weakness against the U.S. Dollar, and thus likely continue to spur interest in Currency Hedged Equity products.
Today is no exception, as we see the U.S. Dollar rallying more than 1.2% in early trading after a prolonged slump since mid-April. Our thought process is pretty simple, and that is, when the Dollar falls in a sustained manner, Currency Hedged Equity products are perhaps “not as necessary” or potentially viewed that way for those investors whom would rather spurn the hedge, but when the opposite scenario occurs, like today with a huge gap up in the U.S. Dollar versus global currencies, investors may continue to scoop up such ETF products for fear of the sharp reversal sustaining itself once again (Reference UUP (PowerShares DB U.S. Dollar Index Bullish, Expense Ratio 0.80%) traded as high as $26.50 in mid-March but is struggling with a low $25 handle even after
today’s move up).
WisdomTree
For more information on Street One ETF market commentary and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com
Street One Financial is an educational/research firm utilizing the Broker Dealer services of Precision Securities, a FINRA registered Broker/Dealer.