Why Walker & Dunlop Shares Dropped

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 Walker & Dunlop were tumbling today, down as much as 20% after it lowered its loan origination guidance for the current quarter.

So what: The commercial real estate lender dropped its loan origination forecast to $1.7-$1.9 billion from a previous range of $2.0-$2.5 billion, blaming rising interest rates and caps on loans that Fannie Mae and Freddie Mac can hold. Walker & Dunlop sells about half of its loans to Fannie & Freddie. Year-to-date loan originations are still projected to be up 43-48% from a year ago, however. Separately, the company also entered into a $150-$200 million term loan today.

Now what:Today's drop was the second such decline for Walker & Dunlop in just two months; shares dropped 15% on August 8 after the company delivered a disappointing earnings report. In fact, Walker & Dunlop has badly missed earnings estimates in its last three quarters, generally a red flag for stocks. Shares are down 40% in that time, and show no sign of rebounding after today's update. The stock may seem cheap at a P/E around 8, but I'd like to see conditions improve before getting on board.

A better financial bet
It's often assumed that small investors are at a great disadvantage relative to hedge fund managers and other institutional investors. But that's not always true. Bound by multibillion-dollar portfolios and strict bylaws that govern what they can and can't invest in, these giants are often prohibited from tapping the market's greatest stocks until it's too late -- that is, after the stocks have already shot into large-cap status. In this free report, our analysts identify one such stock that Warren Buffett himself wishes he could buy but is effectively restricted from doing so because of its size. To discover the identity of this stock instantly (and for free!), simply click here now.

The article Why Walker & Dunlop Shares Dropped originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of Walker & Dunlop. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story