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Motley Fool: Commercial real estate financing, anyone?

Walker & Dunlop Chairman and CEO Willy Walker rings the closing bell at the New York Stock Exchange last year to celebrate the 10th anniversary of the company’s initial public offering, or IPO.  (Courtesy photo)
Walker & Dunlop Chairman and CEO Willy Walker rings the closing bell at the New York Stock Exchange last year to celebrate the 10th anniversary of the company’s initial public offering, or IPO. (Courtesy photo)

Walker & Dunlop (NYSE: WD) is a small but impressive finance company that has been around since the 1930s and does all kinds of finance for commercial real estate. One of the biggest commercial real estate lenders in the country, it originates commercial mortgages with a specific concentration in multifamily properties (including apartment buildings and military and student housing). It’s also the eighth-largest commercial mortgage servicer in the United States, with a servicing portfolio of $107.2 billion as of the end of 2020.

Walker & Dunlop has experienced explosive growth since it went public in 2010. Over the past decade, its shares have soared by over 900%, averaging annual growth of more than 26%. In its last annual report, it posted 29% year-over-year growth in transaction volume, 33% growth in revenue and a 41% rise in diluted earnings per share. The company doubled its revenue over the past five years, and is looking to double it again in the coming five years.

Investors can expect continuing growth over the long term, as well as dividend income, with the company’s payout recently yielding 1.55%. (The Motley Fool owns shares of and recommends Walker & Dunlop.)

Ask the Fool

Q: What’s a company’s “market cap”? – T.W., Muskegon, Michigan

A: The term is short for market capitalization, which reflects the company’s total value in the stock market. It’s calculated by multiplying the total number of shares outstanding by the current share price.

Consider Apple, for example, which was recently trading about $150 per share. To find its total shares outstanding, you might check out its latest financial statement. Or check out websites such as Yahoo! Finance, which include shares outstanding among the company statistics they offer. Multiply Apple’s recent share count of 16.5 billion by $150 and you’ll arrive at its recent market cap – about $2.5 trillion. That figure can give you a sense of whether the company is overvalued or undervalued, if you compare it to past levels or to peers.

Q: If I’d invested $1 in the stock market after the 1929 crash, what would I have today? – F.E., Abilene, Texas

A: The crash of 1929 took place over many months and continued beyond 1929. The Dow Jones Industrial Average, or the Dow, peaked in early September 1929 at 381. It initially plunged in October, falling by 12.8% on Oct. 28 and then another 11.7% on Oct. 29, when it closed at 230. It rallied a bit but continued a long descent, falling to 41 in July 1932. At that point, it was down about 89% from its high. It took 25 years, from 1929 to 1954, for the Dow to hit its previous high of 381 again.

With the Dow recently around 35,800, it’s up 86,800% since that low of 41 – enough to turn your $1 into $869, at an annual average growth rate of roughly 7.9%. And that doesn’t even include dividends

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My dumbest investment

My dumbest investment? I sold Shopify at $80 based on valuation concerns. – M.A., online

The Fool responds: There are different schools of thought in the investing world, and your actions make perfect sense to one of them – value investors – who seek to buy into companies at prices below their fair value. Value investors can grow uneasy owning stocks when they appear to be very richly valued, as that suggests that they may soon fall in value.

The contrasting school of thought is that of growth investors, who focus less on a stock’s valuation and more on its growth prospects. Growth investors are often willing to pay premium prices for high-performing companies, expecting them to grow into – and exceed – those values over time.

So while a value investor may never invest in a fast-growing stock such as Shopify, a growth investor would, perhaps pointing out that companies such as Amazon.com and Apple have often seemed overvalued and then have gone on to hit new highs repeatedly.

Shopify’s stock has grown by more than 3,400% over the past five years, enough to turn a $10,000 investment into more than $350,000. The specialist in e-commerce software recently had a total market value of $183 billion, with many expecting it to be worth much more than that in the future. Others, though, wonder if the stock has gotten ahead of itself.

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