It may not be as big as Invesco Ltd. (NYSE:IVZ) or as high-profile as BlackRock, Inc. (NYSE:BLK), but WisdomTree Investments, Inc. (NASDAQ:WETF) offers something to investors right now that IVZ and BLK don't ... a lot of near-term upside potential after a big tumble between January and May.
Just to put things in perspective, shares of WisdomTree Investments have been hit hard since January 22nd. That's when they peaked at $18.50 and began a pullback that wouldn't quit until May 16th when WETF hit a low of $9.11; that's a 50% selloff for those keeping score at home.
And no, it wasn't something industry-related. Invesco Ltd. actually made a gain during the same period. BlackRock didn't, but BLK shares are still only down 6% since mid-January.
So what happened to WisdomTree Investments, Inc. to spark getting its stock price cut in half? It's largely a matter of perspective, but largely, nothing besides the fact that it was a victim of its own success.
Between the end of 2012 and mid-January of this year, WETF shares tripled in value as the market fell in love with the idea of the industry-specific and leveraged ETFs that WisdomTree sponsors. The company's assets under management ballooned, and the stock followed suit... perhaps a little too much. By the time January rolled around, more than a few pros were getting nervous about the ascent. Goldman downgraded it from a buy to neutral, and a Seeking Alpha piece suggested its assets under management figure was distorted. That's all it took for the vulnerable stock to rollover, and it kept rolling (lower) for the next four months.
As they say though, nothing lasts forever, and it looks like shares of WisdomTree Investments have just turned things around. In fact, WETF has given all the tell-tale signs of a reversal.
The biggest of those clues is the bar from May 16th. That's the day WETF hit a multi-month low, but it's also the day shares bounced back to close at the high for the day. The hammer-shaped bar suggests we transitioned from a net-selling to a net-buying environment, and the volume surge that day suggests the last of the would-be sellers were flushed out while the first of the would-be buyers began to pile in. And sure enough, WisdomTree Investments shares have been advancing ever since (mostly on higher volume), breaking above a felling trend line in the process, and rekindling that bullish effort yesterday.
In other words, what we're seeing here is a paradigm shift, for the better. There's still a ton of ground for the stock to recover, however.
Some traders might be waiting for WETF to move back above the 50-day moving average line (purple) at $11.32 before stepping into a position, and that might be a prudent decision. It may also be an unnecessary caution though, given how oversold the stock is and how firm the rebound effort has become in just a few days. WisdomTree Investments may not hit a ceiling until the $16.00 area.
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