Saul, a few months back, you indicated that you’d likely need to see another month or 2 of closings before deciding whether to stay in this stock. The last post of yours that I was able to find discussed what it would mean if LGIH was to even slightly exceed its guidance of closing 4700 homes for 2017. Now that it seems unlikely it will even meet that guidance, what are your thoughts? Are you planning to hold until next week’s earnings release and conference call? Or have you already sold your shares?
At this point, and with interest rates trending up, I don’t believe LGIH will make 4700 units this year. If the economy grows faster in the latter half, there is a chance it can happen. I don’t like how LGIH is trending right now but it’s the cheapest stock in my portfolio. I sold 60% of my allocation today.
As of last update, Saul had 12.8% allocation; we can only guess Saul’s next move …
az5speedy and LegoAbs - I am imressed that you guys caught this. This is the kind of analysis that I usually expect from Saul. I can’t wait to see what he says. I wonder if you beat him to the punch?
az5speedy and LegoAbs - I am imressed that you guys caught this. This is the kind of analysis that I usually expect from Saul. I can’t wait to see what he says. I wonder if you beat him to the punch?
Thanks tdonb. Saul doesn’t usually tell us in real time what he is buying and selling, and he has explained on this board why that is the case And I certainly understand and respect that. But, of course, I cannot help but wonder what his thoughts are, given the disappointing number for April closings.
I, for one, sold out today. Judging from their sales numbers over the last few months, I have lost my confidence. At least until I see how the next few months’ numbers come in. But I am not holding and waiting around to find out. I was waffling about selling out of TWLO last week and didn’t, and we all saw how that ended up. I will be interested to see what Saul is doing.
Thanks all for the ongoing education and community.
I, for one, sold out today. Judging from their sales numbers over the last few months, I have lost my confidence. At least until I see how the next few months’ numbers come in. But I am not holding and waiting around to find out. I was waffling about selling out of TWLO last week and didn’t, and we all saw how that ended up. I will be interested to see what Saul is doing.
oceanbluela, I waffled about selling out of TWLO last week as well. That’s part of why I’m curious about Saul’s take on LGIH today. I sold half my shares of LGIH a few days ago… I just had a bad feeling about the stock, and I will likely sell the remainder today.
Okay, I don’t usually talk about what I’m doing with major positions until the end of the month, and I really think that everyone should decide for themselves what they should do about each investment, and not copy me. That said, I certainly don’t make my decisions about stocks based on one months sales at a time. Right now LGIH is at $29.40. They estimate earnings for the year of $4.00 to $4.50, probably expecting (or hoping) to beat the $4.50 slightly. Last year they made $3.40.
So what are you worried about? That they will miss the middle of the range and come in at the bottom, at $4.00? They’d still be up 17.6% on the year. What’s the risk? That they will fall to $24.00 and be at six times earnings? Or fall to $20.00? Can you see any company that’s still growing at 17%, and is making $4.00 per year, fall below $20.00? There are only five 4’s in 20!
Twilio was an entirely different animal. They are losing money. They will be losing money at the end of 2017. They will be probably losing money for the 2018 year as well. It will be a long, long, long time until they make $4.00 a share. If ever. It’s a different animal.
Now I fully accept that I may be completely wrong about this, and LGIH may crash and burn. I’ve had some of those too, I admit. But for now it hasn’t even crossed my mind to worry about LGIH. What can I say? If I’m wrong I’ll lose some money.
So what are you worried about? That they will miss the middle of the range and come in at the bottom, at $4.00? They’d still be up 17.6% on the year. What’s the risk? That they will fall to $24.00 and be at six times earnings? Or fall to $20.00? Can you see any company that’s still growing at 17%, and is making $4.00 per year, fall below $20.00? There are only five 4’s in 20!
Twilio was an entirely different animal. They are losing money. They will be losing money at the end of 2017. They will be probably losing money for the 2018 year as well. It will be a long, long, long time until they make $4.00 a share. If ever. It’s a different animal.
Hi Saul,
I do not think anyone is talking about earnings. What I see on the boards is people talking about homes sold. It’s obvious they are going to miss their numbers, now you don’t think they are going to sell off for missing their own numbers?
Twilio actually made their numbers but downgraded their Revenues and earnings this quarter along with the loss of some of Uber’s business. That is why they got hit. If LGIH doesn’t downgrade the number of homes they are going to build this year by the next quarter earnings report then I would be worried that I couldn’t trust management. If they do move their numbers down, LGIH is going to take a hit also. I wouldn’t think it will be as big as Twilio’s, because they are a lot cheaper. But they will still take a hit.
So this is the worry, that they will not hit their own number. Homes built per year.
I have no personal interest in LGIH, but let me make a brief observation about the arguments I am seeing here. Saul seems focused on financial performance and seems to feel that even if they do not make their initial projection, they are still growing revenue and earnings at a respectable rate, i.e., while missing the projection means they may take a little longer to get to the same size, it is only an adjustment, not a fundamental change. Now, a highly valued company might get punished for such a miss, since the price was based on a very high growth rate, this is not a highly valued company, so it seems like the punishment should be limited.
Counter this is the idea that missing projections means we can’t trust the company. And yet, housing is a notoriously fickle market where projections are hard to make. Any number of factors can influence month to month sales, as management themselves has said. Companies can get into trouble missing forecasts, e.g., if they spend as if the growth was still happening, but I hear nothing of that sort about LGIH.
Saul seems focused on financial performance and seems to feel that even if they do not make their initial projection, they are still growing revenue and earnings at a respectable rate, i.e.,
I agree, but the people asking the question are focused on homes built. So I think that needs to be addressed. I can see where someone might think because the price of housing is increasing, that they can hit their financial numbers, but miss their numbers of homes built. That might not effect the company. But I am not so sure. The numbers of homes built is a metric that LGIH has been following.
Counter this is the idea that missing projections means we can’t trust the company.
I think you might have misunderstood me. What I meant was by the next quarter LGIH should realize they will not hit their numbers and quide down. If they do not and then miss their numbers at the end of the year then I probably wouldn’t trust management. Not because they didn’t make their numbers, that happens all the time, but because they didn’t realize that they weren’t going to hit their numbers. After all, most people on this board have been worried about it for the last few months and after this months number it is almost assured they will miss.
…the people asking the question are focused on homes built.
Just one minor terminology correction, I’m sure it’s what you meant, but it’s homes closed, not homes built, or homes sold. They could build 4700 homes, and even sell 4700 homes, but if they don’t close 4700 homes, they miss their number they’ve quoted for months now.
I’m a masonry contractor here in Dallas. I do glass block for a lot of builders here. I’m seeing a lot of new neighborhoods selling out with no new neighborhoods not yet ready to sell. They are cutting new roads all over but that take a while. I see a housing boom coming to Texas with all these new additions. I’m not sure I can keep up with demand.
I’m a masonry contractor here in Dallas. I do glass block for a lot of builders here. I’m seeing a lot of new neighborhoods selling out with no new neighborhoods not yet ready to sell. They are cutting new roads all over but that take a while. I see a housing boom coming to Texas with all these new additions. I’m not sure I can keep up with demand.
I will purchase more shares of LGIH.
Wayne 5/42017 post# 27419
I’m a masonry contractor in Dallas and work for a lot of builders but not LGIH. Because of increased sales in the last 2 years, these additions are selling out fast without new additions yet ready. The market is hot here in Dallas and they are not able to cut enough new roads for new lots for increased demand. But there is new land being developed all over. I will be holding and may considered buying more if price drops.
I’ve sold my shares a while ago because I stopped believing management with their statement: “we believe we are on track to close more than 4,700 homes in 2017”.
And an interesting fact, that statement has been removed from the last monthly home closing report dated May 3rd.
So, it is clear to me that they no longer believe they will close more than 4,700 homes in 2007.
And if they do not meet thief home closing guidance of more than 4,700 homes, why their EPS guidance should still be valid?
I no longer believe their EPS of $4 to $4.50 guidance.
…the people asking the question are focused on homes built.
Just one minor terminology correction, I’m sure it’s what you meant, but it’s homes closed, not homes built, or homes sold. They could build 4700 homes, and even sell 4700 homes, but if they don’t close 4700 homes, they miss their number they’ve quoted for months now.
Right foodles, thanks for the help. Homes closed should have been what I said.
