LGIH purchase

I did add to LGIH this morning at $59.88. I decided to just ride past performance. The demand is there. LGIH has the lots though they may fall below 20 quarters supply when the Q4 is released. The cash flow is there to support continued growth. The lower tax rate will provide additional profit to allow more growth. The higher sales over the last 6 months will allow more spec houses under the borrowing agreement. Their goal is to be in the top 50 markets.

I have some concern that the “quarters of lots” has been falling, but OTH they have been buying higher percent of improved lots over raw land which shortens the 3 to 5 year period to bring houses to market. Still something to monitor.

Affordability and labor/material cost issues are still there but that is yet to materialize.

Therefore, put 1.5% of portfolio from cash to LGIH so that it is equal to SQ in the #3 and #4 spots.

Earnings this week!

KC

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I think that LGIH has been caught up on interest rate worries. They are not alone and likely one of the least exposed to tax reform act concerns and interest rate worries imo. Because they sell a lot of first time buyer houses the mortgage deductibility cap will not apply. It is not as if LGIH was singled out as the only builder to drop. The whole sector is down. For now I believe the baby was thrown out with the bath water.

http://stockcharts.com/h-sc/ui?s=XHB&p=D&b=5&g=0…

Their earnings should serve to rebut this bearish thesis. When I purchased my first home interest rates for 30 year mortgages were 9%. When I bought my 2nd home I paid an interest rates of 13.25%. Houses still sold. I think they will still sell at 4%. That said we are unlikely to repeat the appreciation on 2017 from 28.73 to 75.03. I am betting it revisits the 70+ levels.

Rob

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This morning Wedbush upgraded LGIH to outperform.

Rob

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This morning Wedbush upgraded LGIH to outperform.

A little late to the party, aren’t they? Not saying LGIH won’t go up further from here, but the time to get LGIH was 1-2 years ago when those of us on this board were loading up at prices from $20-$30.

I’ve sold about half my LGIH holdings in the $60s and may get rid of the rest before they start coming up against the difficult comps they’ll face in Q2 and beyond.

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Reading a synopsis of the the report Wedbush’s tgt is at $73. At a price in the lower $60s I think they see incremental gains, not home runs from here. Rating was to outperform.

Rob