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WisdomTree: A Wise Play on ETFs

09/29/2016 8:00 am EST

Focus: ETFs

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Our latest recommendation is an investment company that is on the cusp of a major trend: investor migration from actively managed funds to index funds, notes Mark Skousen, editor of High-Income Alert.

There is no good reason to hold off making new stock investments. And a good place to start would be WisdomTree Investments (WETF), an asset management company specializing in exchange-traded funds.

With almost $40 billion in assets under management, it is the ninth-largest ETF sponsor globally. Forbes also recently put the company to its 2016 List of “America’s 50 Most Trustworthy Financial Companies.”

More investors are now realizing that -- over long periods -- actively managed equity funds virtually never outperform their unmanaged benchmarks.

Industry statistics show that three out of four mutual fund managers fail each year. More than 95% of them falter over a period of a decade or more.

However, WisdomTree is not just offering plain-vanilla index funds. Many of its equity ETFs are evenly weighted, rather than market-cap weighted like most indexes.

It also offers a broad selection of dividend-weighted indexes. Those are particularly popular in these low-yielding times.

I estimate WisdomTree will earn 25 cents a share this year and 34 cents in 2017. And at the rate money is leaving actively managed funds, that growth rate may be too conservative.

Founder, CEO, President and Executive Director Jonathan Steinberg recently purchased 250,000 shares, an investment of more than $2.54 million.

He clearly agrees that the stock is undervalued. Plus, you’ll also collect a 3% dividend yield here. So pick up WisdomTree Investments at market. And use a sell stop at $9 for protection.

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By Mark Skousen, Editor of High-Income Alert

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