LGIH - My thoughts

…few scraps of farmland around and virtually nowhere to buy groceries, eat out, let alone buy clothes or whatever, …

I’m in the Pebble Creek development so you drove by me as you passed the Pebble Creek Parkway exit.
I bought our Snowbird home in '99, at the time there was only one grocery store on the north side of
the freeway, with others in old Goodyear on the south side of it. We were largely surrounded by nothing
but cotton fields for many miles. Now I can throw a rock and hit a grocery or drug store or a bar in every direction.

I’m guessing you turned off to the Sundance community 5-6 miles west of me.
If you had continued west to the next exit or two you would have seen all the usual needs,
Lowes or Home Depot, grocery stores, yada yada. Strip mall type areas.
They’re a little closer to the “fancy” Varado Golf Dev. on the north side of the freeway.

Rather silly they don’t have maps to each development.
http://www.lgihomes.com/community.cfm?id=sundance
TUSCANO, NEW CONSTRUCTION NEIGHBORHOOD - new one southeast of me, towards Phoenix Intl. Raceway.
http://www.lgihomes.com/community.cfm?id=tuscano

JT

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I am guessing that the national election did have a dampening affect on buying interest

Other homebuilders are not experiencing same level of decline. The problem seems to be unique to LGIH.

The rose colored glasses view is that this would cut the increase in inventory and give positive CFFO and improve the debt/equity situation.

But investors are not looking for that in this situation. So it is not a positive.

But investors are not looking for that in this situation. So it is not a positive.

With all due respect, yes they are looking for improved FCF from operations and better debt/equity ratio. Direct correlation between p/e and debt/equity. We’ve covered that before.

Other homebuilders are not experiencing same level of decline. The problem seems to be unique to LGIH.

Other home builders are not selling to the same demographic. I’m going to not develop that any more to avoid political food fighting.

In any case, my FCF comments were (mostly) tongue-in-cheek.

Sure wish now I had not dilly-daddled with the buy price last night. Left half the upside on the table. Oh well, LGIH is still my largest position. I do think that the market reaction is surprising. Well, nothing ought surprise, I guess. But these results are not “up 14% unexpected”. Shheeesh.

KC, now ohforsix after missing that hanging fastball last night.

With all due respect, yes they are looking for improved FCF from operations and better debt/equity ratio

Not all industries are measured same way. The very definition of growth for a homebuilder would involve increased inventory, increasing community count, lots, homes being build for selling etc. These take cash, and if they are growing they cannot be growing FCF.

SO they cannot be measured on FCF. To understand this better, look at homebuilders during 2010, 2011 period. They were deleveraging their balance sheet by reducing inventory and generating tons of cash. How their share price performed relative to that?

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Sure wish now I had not dilly-daddled with the buy price last night.

Hi KC,

I had been thinking of trimming slightly, but after writing up my LGIH thoughts post yesterday I convinced myself and added, but just a tiny amount (at $28.47). I really wish I had added more, but it was already an outsized position.

By the way, you should restrain that impulse to try to buy a stock a little cheaper (I know it’s hard). As I said in the KnowledgeBase, when its at $50 you won’t remember or care if you paid $10.10 or $10.30 for it but you will kick yourself if you missed it entirely trying to save 20 cents.

Best

Saul

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when its at $50 you won’t remember or care if you paid $10.10 or $10.30 for it

I agree. I wouldn’t worry about the pennies if I were buying with long term in mind. This was a trading position. I doubled my already largest position in LGIH a few weeks back and then took that profit. This was a rinse/repeat situation, looking to make another 5% or so. The ask quantity was 1/10th of my intended purchase and I don’t have level whatever info so all I see is the one ask price/quantity. Dislike putting in a market order with a wide bid/ask and fairly thin trading volume. In retrospect, considering $5 commission, I could have taken the ask quantity and then evaluate the next up ask.

OforSix (KC) whose LGIH gain was reduced by CASY’s downer. market giveth and the market taketh away

I don’t have level whatever info so all I see is the one ask price/quantity.

Hi KC,
If at all possible, I’d suggest you ask your broker for Level 2 streaming quotes. Otherwise you are buying and selling half-blind. But that’s just a suggestion.
Saul

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