Given the red-hot housing market, you’d think that real estate loan originator UWM Holdings (NYSE:UWMC) should be a market darling. Yet, UWMC stock is surprisingly cheap today.
It doesn’t quite make sense. Everything else attached to real estate is pricey nowadays. Heck, even lumber is in a massive bull market.
UWM Holdings has been America’s number-one wholesale mortgage lender, as measured by origination, for six years running. Amazingly, the market doesn’t seem to appreciate this fact.
So, why not take advantage of this mispricing in the market? And while you’re waiting for the stock to rebound, you can collect a healthy dividend yield. Sounds like a win-win proposition, if you ask me.
A Closer Look at UWMC Stock
On Sept. 23 of last year, UWM Holdings announced that it would go public through a reverse merger with special purpose acquisition company (SPAC) Gores Holdings IV (which traded under the ticker symbol GHIV).
This deal, valued at $16.1 billion, was the biggest SPAC deal ever at that time. You’ve probably seen SPAC stocks immediately blast off after a merger target has been announced, but that’s not what happened in this instance.
Rather, there was a delayed reaction in the market. GHIV/UWMC stock went sideways for a while, but did have its breakthrough moment eventually.
That moment took place in December of 2020. With hardly any warning, the stock ran up to a 52-week high of $14.38 on Dec. 28.
After that, GHIV stock actually dropped below its pre-merger-announcement price. This is almost inexplicable, as the real estate market has absolutely been on fire.
On April 20, 2021, I went full-on bullish and recommended taking a long position in UWM Holdings. The share price was $7.23 at that time.
Fast-forward to May 4, and UWMC stock closed at $7.87. I would suggest that there’s much more room for the stock to run.
I should also mention the forward annual dividend yield of 4.9%. That’s generous and should boost the bull case for UWM Holdings as a long-term investment.
The Market Won’t Slow Down
In 2020, UWM Holdings had what can only be described as a blockbuster year.
For the full year, the company recorded loan origination production of $182.5 billion. That’s a 69% increase compared to UWM Holdings’ prior-year annual production of $107.8 billion, which was itself a yearly record for the company.
Can UWM Holdings maintain this pace? It’s certainly possible if the broader real estate market continues to expand.
And the data seems to suggest that expansion is afoot. As reported by Research and Markets, the global real estate market is projected to grow to $2.77 trillion in 2021.
Some folks would assume that the Millennial generation will be largely responsible for this. After all, a number of Millennials are buying their first homes, or are planning to do so in the near future.
Interestingly, however, Research and Markets asserts that the younger Generation Z is “predicted to spend more than any other generations on rental services in their lifetime.”
Moreover, Gen Z is characterized as being “highly dependent on technology” and relying “more on the internet and social media to make purchasing and lifestyle decisions.”
So, the mortgage loan originators of today and tomorrow will need to be tech-savvy. Thankfully, UWM Holdings has that angle covered.
Right on the company’s home page, visitors can easily access a suite of tech-enhanced tools.
These include the InTouch mobile app, the free Blink+ online mortgage application and the FindAMortgageBroker.com portal, which connects borrowers and real estate agent partners.
The Bottom Line
There’s no need to try to predict the future path of the real estate market. I’ll leave that to the experts.
Instead, we can compare the value proposition of UWM Holdings to its share price. I’d say there’s a mismatch there — and an opportunity for enterprising investors.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.