Why WisdomTree's Shares Bloomed
Nov 8th 2012 2:41PM
Updated Nov 8th 2012 2:44PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of WisdomTree Investments (NAS: WETF) are up over 7% today following an early pop sending shares as much as 13% higher than yesterday's close. The market is reacting jubilantly to WisdomTree's de facto victory in a patent infringement lawsuit.
So what: WisdomTree had been fighting a suit brought by investment management strategy firm Research Affiliates, LLC. Research Affiliates had claimed WisdomTree's investing strategies were based on designs Research Affiliates had originally developed. Today, Research Affiliates not only dropped its patent infringement claims, it will also make a one-time payment of $700,000 to WisdomTree.
WisdomTree and Research Affiliates have effectively cut off the possibility of future suits as well, with each party agreeing not to sue the other over current or future patents regarding fundamentally weighted indexes for another eight years.
Now what: WisdomTree wasn't cheap before, and it's even costlier now, but it's at least blown away the clouds of legal action from over its head. Its free cash flow has been higher than net income, but its price-to-free-cash-flow ratio is higher than 40, which isn't exactly "screaming buy" territory. I'd keep an eye on this stock, but I'd dig up more data before diving in.
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The article Why WisdomTree's Shares Bloomed originally appeared on Fool.com.Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. Motley Fool newsletter services have recommended buying shares of WisdomTree Investments. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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