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($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
The Three Little Pigs was included in The Nursery Rhymes of England. The story in its arguably best-known form appeared in English Fairy Tales by Joseph Jacobs, first published in 1890. The story begins with the title characters being sent out into the world by their mother, to "seek out their fortune". The first little pig builds a house of straw, but a wolf blows it down and devours him. The second little pig builds a house of sticks, which the wolf also blows down, and the second little pig is also devoured. Each exchange between wolf and pig features ringing proverbial phrases, namely:
"Little pig, little pig, let me come in."
"not by the hair on my chinny chin chin."
"Then I'll huff, and I'll puff, and I'll blow your house down."
The third little pig builds a house of bricks. The wolf fails to blow down the house. He then attempts to trick the pig out of the house by asking to meet him at various places, but he is outwitted each time. Finally, the wolf resolves to come down the chimney, whereupon the pig catches the wolf in a cauldron of boiling water, slams the lid on, then cooks and eats him. In the more politically correct versions, the first and second little pigs are not eaten by the wolf after he demolishes their homes, but instead run to their brother's house, and after the wolf goes down the chimney he runs away and never returns to eat the three little pigs, who all survive. Much less violence…. and no kids’ nightmares.
The real point of all of this is that there is always a demand for housing, and that natural disasters can create a spike in demand. Which takes me to Hurricane Harvey in Houston…and Hurricane Irma in Florida. Hold that thought.
Yes, that’s right. $$$MR. MARKET$$$ just cannot get enough of homebuilders. Is it the smell of wood? What am I, wood? Is it the “Ka-Knock Ka-Knock Ka Knock” of that lonely hammer echoing across the newly razed farmlands? Of course not. Is it the angry rumble of the hungry backhoe as it digs up the old trashdumps to make a new foundation for some 3 yr old’s playroom? Not exactly. Is it those lean strapping young lads with their tan muscular bodies hauling shingles up to the roof? Umm…the thought never crossed my mind.
How many times do I have to repeat myself?? It’s all about earnings earnings earnings. Today I bought LGI Homes Inc (LGIH) at $56.92. I will sell it in 4 to 6 weeks at 66.03. Here’s why I like LGIH:
Yes…that is one VERY interesting chart. It just WANTS to go up. This stock is up 84% in the past year and yet its PE is only 15. It’s great growth at an even better value. Why is this company so awesome? And, more importantly, why is this stock price going to continue to climb?
LGI Homes is one of the nation's fastest growing homebuilders engaged in the design and construction of homes across Texas, Arizona, Florida, Georgia, New Mexico, North Carolina, South Carolina, Colorado, Washington and Tennessee. Their business model is based on skillfully building and selling high quality homes with well-designed floor plans. They are focused on the entry-level homebuyer, offering homes at affordable prices in attractive locations while utilizing a well-established sales and marketing approach, a culture of customer service excellence, and a highly efficient construction process.
Building homes with great value and great prices in excellent locations, such as Dallas-Fort Worth, Houston, San Antonio, New Braunfels, Austin, Phoenix, Tucson, Albuquerque, Tampa, Orlando, Fort Myers, Jacksonville, Lakeland, Charlotte, Raleigh, Winston-Salem, Greensboro, Nashville, Denver, Colorado Springs, Minneapolis, Seattle, Olympia, Tacoma, Portland, Atlanta and Athens. Let me repeat – Houston, Tampa, Fort Myers, Jacksonville…..Hurricane Harvey…Hurricane Irma. What happens when homes are damaged? People get insurance checks and new homes are built.
The company pursues a flexible land acquisition strategy of purchasing or optioning finished lots, at attractive prices, or purchasing raw land for residential development. They are experienced in converting raw land into residential communities given their history as a successful land developer. They target land that is away from city centers, but still close to major thoroughfares, retail districts and centers of business. Prior to land acquisition, LGI employs a comprehensive test marketing strategy to ensure consumer demand meets our requirements
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) showed homebuilder confidence rose to the highest level since May. The HMI rose 4 points to 68 in October, indicating homebuilder confidence rebounded quicker-than-expected. The median economic forecast called for a reading of 64. A reading above 50 indicates a favorable outlook on home sales, and below 50 indicates a negative outlook.
“This month’s report shows that home builders are rebounding from the initial shock of the hurricanes,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.
“It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” said NAHB Chief Economist Robert Dietz. “With a tight inventory of existing homes and promising growth in household formation, we can expect the new home market continue to strengthen at a modest rate in the months ahead.”
LGI Homes is small for a homebuilder, with a market cap of $1 billion. What is crazy is the growth this company is experiencing. With a PE of only 15, the company reported its second-quarter earnings in August, home sales revenue had increased 45% year over year to $324 million, and net income increased to $32 million, which was a 56% increase YOY. This trend continued right into the hurricanes. In September, LGIH christened two new communities in Texas.
Earlier this month, LGI announced 542 homes closed in September 2017, up from 363 home closings in September 2016, representing year-over-year growth of 49.3%. In addition, the Company announced record-breaking quarterly home closings of 1,729 for the third quarter of 2017 compared to 1,052 home closings in the third quarter of 2016, a 64.4% increase year-over-year. The Company had 4,001 home closings during the first nine months of 2017, a 32.3% increase over 3,024 homes closed during the first nine months of 2016. . Still, a shortage of available homes is delaying many would-be buyers and limiting sales. When the supply comes in – it will sell sell sell at prices over asking because people will fight over this short supply!
In Florida, Hurricane Irma sharply lowered sales last month, which were 22 percent lower than a year ago. Sales fell more than 15 percent from a year earlier in Miami, Fort Lauderdale, Jacksonville, Orlando and Tampa. But this demand is pent up, and new demand will explode like a jack in the box once people hit the pavement looking for a new home.
"The housing market is running on fumes due to low inventory," said Redfin chief economist Nela Richardson. "The inventory shortage is most severe for affordable homes. There has not been an increase in homes priced under $260,000 in two years." This is what LGI specializes in! Every house they finish will have people all over them like flies on poop. Why believe $$$MR. MARKET$$$ when you can go right to the voice of the homebuyers:
“I got a flyer in the mail and I wanted to get my own home. There were also people who were saying a lot of good things about their experience with LGI so I went to go talk to them. Their rep was good. He was very transparent, gave all the information, and made sure I was aware of what I had to do and the deadlines. They showed me the floor plan, and then they said, “Okay. These are all the floor plans you can choose from.” I picked out different things that already came standard and the quality of the build is excellent. I'm also satisfied with the amenities offered to me. I’ve met a couple of the neighbors and they're nice.”
Here’s another:
“I had a great experience with LGI Homes. They were the ones that helped us the most. Everyone there was eager and happy to assist us with anything we needed or guide us when we didn't know what we needed to do and how to do it. Dealing with other agencies and realtors was overwhelming and a lot to take in. I didn't know any better even after I took a first buyer's class. It was a lot of information all at one time. I started to wonder whether I was doing the right thing. Buyer's remorse started to get in, like if it's the right choice or the right time.
But the LGI people came in and they guided me through it. They asked me from day one how much I was going to pour in. They took me to a house where my budget was, told me it was the house they thought would fit me the best and walked me through it. They made it really easy to come in and buy the house. I think this is how they make it. From people to like the walk-throughs to the downpayment, every step was easy. They encouraged me, stood behind me and told me the steps that were needed to be done. They told me not to worry as it was all going to work out. We started the paperwork in December and we received our pre-built house in February. It's well -built and the community is very nice, clean and well-kept. I'm hoping they get more people here and start a new life. We're very much satisfied with the amenities too.”
And here’s still more:
“Being in our new home has been positive for me. I'm somewhere where I want to be. I'm happy to wake up to the smell of a new house and I always feel the calm after walking into my own home. Overall, it was a very nice experience and I'm satisfied. LGI took an overwhelming experience and made it very easy to accomplish purchasing a house. I hear these horror stories and hope it doesn't happen to me. But then I go through this experience with LGI and I suggest for others to try them.
I was a first-time homebuyer. Before, I honestly didn’t think that I can afford a home. But I have seen flyers from LGI Homes and I even used to get a lot of them back in Chicago. They were actually good at getting me into a home. My wife and I were tired of renting. We have been renting ever since we were young and neither one of us had ever owned a home. With the rent going up, me and wife had to move every two years. Then we saw LGI and we decided to go and take a look. The person who we were with made us feel comfortable as far as attempting to buy a house. And every step along the way, LGI was really good. I would give them that because I could have just turned around and thanked them for letting me see the house. The way LGI had it set-up, everything was done in their office. The lender, the underwriter, and everything to process the mortgage was there. I feel that's the way it should be.”
The macroeconomic picture is better for home buying. 401k’s are bigger, giving people more confidence. Interest rates are low. Unemployment is low and there is optimism that a tax cut will come through. All of this information will support homebuying. . Recent data suggests the housing recovery remains on track and points to particular strength in the homebuilding and permits numbers.
Since LGI has a big stake in the ground in the big state of Texas (in 2013 Texas represented 90% of the companies homesales – it’s now around 50% with Florida being another big market for the company ), an oil price recovery will really fuel the growth of this company relative to its peers. With the OPEC countries continue to comply with production cuts, the price of oil is now up 50% over its recent lows. This will definitely spur homebuying in Texas as more oil companies bring employees back to work.
LGI Highlight summary:
· Profitable every year since inception
· Proven ability to expand into new markets
· Named 2016 Builder of the Year by Professional Builder
· Focused on growth: 71 active communities in 19 markets across 10 states
How can $$$MR. MARKET$$$ be so confident about future earnings for LGIH? History is a good place to start:
The numbers don’t lie. This is a pretty compelling story and the ANAL-ysts project that we will see revenues of 1.1 billion in 2017 and earnings of $4.41 per share. With a return on assets of 10% and return on equity of 25%, this is a strong company just waiting to get stronger. While I think the ANAL-ysts projected house closing numbers are accurate, I believe that the home prices will be 15% higher than what they are expecting…especially in the hurricane recovery markets where new houses will be in higher demand as hurricane victims decide to start up again with their insurance checks in hand. So $$$MR. MARKET$$$ sees revenues of $1.3 billion which would crank up earnings to $5.05 per share. At a PE of 15, this brings us a share price of:
15 x $5.05/share = $75.75…which is well past my selling price.
Here’s what the boss, Eric Thomas Lipar, LGI Homes, Inc. - Chairman and CEO, had to say during last quarter’s earnings call:
“Thanks, Charles. In summary, we had an outstanding quarter and a great first half of the year. Let me provide some guidance and thoughts on what we are seeing, thus far, in the third quarter and looking ahead into the remainder of the year.
The third quarter is off to a great start with 591 closings in July, up 93% from the 306 closings in July of last year. To put this in perspective, in July of 2010, the not-so-distant past, we closed 18 homes. The 591 closings this year came from 76 active selling communities, resulting in a very solid absorption pace, averaging just over 7.8 closings per community per month. Based on the strength of our July closings and the continued demand we are seeing from customers wanting to go from a rental situation to home ownership, we are increasing our closing guidance for 2017 from more than 4,700 homes closed to more than 5,000 homes closed.”
So even though the big bad wolf is going to huff and puff all he wants, these LGI homes are not made of straw. The new owners will be partying by the chimney in their brand new homes. $$$MR. MARKET$$$ is going to make good on this trade and proceeds from this stock winner will go towards Hurricane Relief efforts in the USVI and Puerto Rico. They are islands surrounded by great big oceans, and they need our help.
I am HUGE!
$$$MR. MARKET$$$
The Three Little Pigs was included in The Nursery Rhymes of England. The story in its arguably best-known form appeared in English Fairy Tales by Joseph Jacobs, first published in 1890. The story begins with the title characters being sent out into the world by their mother, to "seek out their fortune". The first little pig builds a house of straw, but a wolf blows it down and devours him. The second little pig builds a house of sticks, which the wolf also blows down, and the second little pig is also devoured. Each exchange between wolf and pig features ringing proverbial phrases, namely:
"Little pig, little pig, let me come in."
"not by the hair on my chinny chin chin."
"Then I'll huff, and I'll puff, and I'll blow your house down."
The third little pig builds a house of bricks. The wolf fails to blow down the house. He then attempts to trick the pig out of the house by asking to meet him at various places, but he is outwitted each time. Finally, the wolf resolves to come down the chimney, whereupon the pig catches the wolf in a cauldron of boiling water, slams the lid on, then cooks and eats him. In the more politically correct versions, the first and second little pigs are not eaten by the wolf after he demolishes their homes, but instead run to their brother's house, and after the wolf goes down the chimney he runs away and never returns to eat the three little pigs, who all survive. Much less violence…. and no kids’ nightmares.
The real point of all of this is that there is always a demand for housing, and that natural disasters can create a spike in demand. Which takes me to Hurricane Harvey in Houston…and Hurricane Irma in Florida. Hold that thought.
Yes, that’s right. $$$MR. MARKET$$$ just cannot get enough of homebuilders. Is it the smell of wood? What am I, wood? Is it the “Ka-Knock Ka-Knock Ka Knock” of that lonely hammer echoing across the newly razed farmlands? Of course not. Is it the angry rumble of the hungry backhoe as it digs up the old trashdumps to make a new foundation for some 3 yr old’s playroom? Not exactly. Is it those lean strapping young lads with their tan muscular bodies hauling shingles up to the roof? Umm…the thought never crossed my mind.
How many times do I have to repeat myself?? It’s all about earnings earnings earnings. Today I bought LGI Homes Inc (LGIH) at $56.92. I will sell it in 4 to 6 weeks at 66.03. Here’s why I like LGIH:
Yes…that is one VERY interesting chart. It just WANTS to go up. This stock is up 84% in the past year and yet its PE is only 15. It’s great growth at an even better value. Why is this company so awesome? And, more importantly, why is this stock price going to continue to climb?
LGI Homes is one of the nation's fastest growing homebuilders engaged in the design and construction of homes across Texas, Arizona, Florida, Georgia, New Mexico, North Carolina, South Carolina, Colorado, Washington and Tennessee. Their business model is based on skillfully building and selling high quality homes with well-designed floor plans. They are focused on the entry-level homebuyer, offering homes at affordable prices in attractive locations while utilizing a well-established sales and marketing approach, a culture of customer service excellence, and a highly efficient construction process.
Building homes with great value and great prices in excellent locations, such as Dallas-Fort Worth, Houston, San Antonio, New Braunfels, Austin, Phoenix, Tucson, Albuquerque, Tampa, Orlando, Fort Myers, Jacksonville, Lakeland, Charlotte, Raleigh, Winston-Salem, Greensboro, Nashville, Denver, Colorado Springs, Minneapolis, Seattle, Olympia, Tacoma, Portland, Atlanta and Athens. Let me repeat – Houston, Tampa, Fort Myers, Jacksonville…..Hurricane Harvey…Hurricane Irma. What happens when homes are damaged? People get insurance checks and new homes are built.
The company pursues a flexible land acquisition strategy of purchasing or optioning finished lots, at attractive prices, or purchasing raw land for residential development. They are experienced in converting raw land into residential communities given their history as a successful land developer. They target land that is away from city centers, but still close to major thoroughfares, retail districts and centers of business. Prior to land acquisition, LGI employs a comprehensive test marketing strategy to ensure consumer demand meets our requirements
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) showed homebuilder confidence rose to the highest level since May. The HMI rose 4 points to 68 in October, indicating homebuilder confidence rebounded quicker-than-expected. The median economic forecast called for a reading of 64. A reading above 50 indicates a favorable outlook on home sales, and below 50 indicates a negative outlook.
“This month’s report shows that home builders are rebounding from the initial shock of the hurricanes,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.
“It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer,” said NAHB Chief Economist Robert Dietz. “With a tight inventory of existing homes and promising growth in household formation, we can expect the new home market continue to strengthen at a modest rate in the months ahead.”
LGI Homes is small for a homebuilder, with a market cap of $1 billion. What is crazy is the growth this company is experiencing. With a PE of only 15, the company reported its second-quarter earnings in August, home sales revenue had increased 45% year over year to $324 million, and net income increased to $32 million, which was a 56% increase YOY. This trend continued right into the hurricanes. In September, LGIH christened two new communities in Texas.
Earlier this month, LGI announced 542 homes closed in September 2017, up from 363 home closings in September 2016, representing year-over-year growth of 49.3%. In addition, the Company announced record-breaking quarterly home closings of 1,729 for the third quarter of 2017 compared to 1,052 home closings in the third quarter of 2016, a 64.4% increase year-over-year. The Company had 4,001 home closings during the first nine months of 2017, a 32.3% increase over 3,024 homes closed during the first nine months of 2016. . Still, a shortage of available homes is delaying many would-be buyers and limiting sales. When the supply comes in – it will sell sell sell at prices over asking because people will fight over this short supply!
In Florida, Hurricane Irma sharply lowered sales last month, which were 22 percent lower than a year ago. Sales fell more than 15 percent from a year earlier in Miami, Fort Lauderdale, Jacksonville, Orlando and Tampa. But this demand is pent up, and new demand will explode like a jack in the box once people hit the pavement looking for a new home.
"The housing market is running on fumes due to low inventory," said Redfin chief economist Nela Richardson. "The inventory shortage is most severe for affordable homes. There has not been an increase in homes priced under $260,000 in two years." This is what LGI specializes in! Every house they finish will have people all over them like flies on poop. Why believe $$$MR. MARKET$$$ when you can go right to the voice of the homebuyers:
“I got a flyer in the mail and I wanted to get my own home. There were also people who were saying a lot of good things about their experience with LGI so I went to go talk to them. Their rep was good. He was very transparent, gave all the information, and made sure I was aware of what I had to do and the deadlines. They showed me the floor plan, and then they said, “Okay. These are all the floor plans you can choose from.” I picked out different things that already came standard and the quality of the build is excellent. I'm also satisfied with the amenities offered to me. I’ve met a couple of the neighbors and they're nice.”
Here’s another:
“I had a great experience with LGI Homes. They were the ones that helped us the most. Everyone there was eager and happy to assist us with anything we needed or guide us when we didn't know what we needed to do and how to do it. Dealing with other agencies and realtors was overwhelming and a lot to take in. I didn't know any better even after I took a first buyer's class. It was a lot of information all at one time. I started to wonder whether I was doing the right thing. Buyer's remorse started to get in, like if it's the right choice or the right time.
But the LGI people came in and they guided me through it. They asked me from day one how much I was going to pour in. They took me to a house where my budget was, told me it was the house they thought would fit me the best and walked me through it. They made it really easy to come in and buy the house. I think this is how they make it. From people to like the walk-throughs to the downpayment, every step was easy. They encouraged me, stood behind me and told me the steps that were needed to be done. They told me not to worry as it was all going to work out. We started the paperwork in December and we received our pre-built house in February. It's well -built and the community is very nice, clean and well-kept. I'm hoping they get more people here and start a new life. We're very much satisfied with the amenities too.”
And here’s still more:
“Being in our new home has been positive for me. I'm somewhere where I want to be. I'm happy to wake up to the smell of a new house and I always feel the calm after walking into my own home. Overall, it was a very nice experience and I'm satisfied. LGI took an overwhelming experience and made it very easy to accomplish purchasing a house. I hear these horror stories and hope it doesn't happen to me. But then I go through this experience with LGI and I suggest for others to try them.
I was a first-time homebuyer. Before, I honestly didn’t think that I can afford a home. But I have seen flyers from LGI Homes and I even used to get a lot of them back in Chicago. They were actually good at getting me into a home. My wife and I were tired of renting. We have been renting ever since we were young and neither one of us had ever owned a home. With the rent going up, me and wife had to move every two years. Then we saw LGI and we decided to go and take a look. The person who we were with made us feel comfortable as far as attempting to buy a house. And every step along the way, LGI was really good. I would give them that because I could have just turned around and thanked them for letting me see the house. The way LGI had it set-up, everything was done in their office. The lender, the underwriter, and everything to process the mortgage was there. I feel that's the way it should be.”
The macroeconomic picture is better for home buying. 401k’s are bigger, giving people more confidence. Interest rates are low. Unemployment is low and there is optimism that a tax cut will come through. All of this information will support homebuying. . Recent data suggests the housing recovery remains on track and points to particular strength in the homebuilding and permits numbers.
Since LGI has a big stake in the ground in the big state of Texas (in 2013 Texas represented 90% of the companies homesales – it’s now around 50% with Florida being another big market for the company ), an oil price recovery will really fuel the growth of this company relative to its peers. With the OPEC countries continue to comply with production cuts, the price of oil is now up 50% over its recent lows. This will definitely spur homebuying in Texas as more oil companies bring employees back to work.
LGI Highlight summary:
· Profitable every year since inception
· Proven ability to expand into new markets
· Named 2016 Builder of the Year by Professional Builder
· Focused on growth: 71 active communities in 19 markets across 10 states
How can $$$MR. MARKET$$$ be so confident about future earnings for LGIH? History is a good place to start:
| Year | 2012 | 2013 | 2014 | 2015 | 2016 |
| Revenue | 76 | 163 | 383 | 630 | 838 |
| Earnings | 10 | 22 | 28 | 53 | 75 |
| EPS | $ 1.05 | $ 1.08 | $ 1.33 | $ 2.44 | $ 3.41 |
15 x $5.05/share = $75.75…which is well past my selling price.
Here’s what the boss, Eric Thomas Lipar, LGI Homes, Inc. - Chairman and CEO, had to say during last quarter’s earnings call:
“Thanks, Charles. In summary, we had an outstanding quarter and a great first half of the year. Let me provide some guidance and thoughts on what we are seeing, thus far, in the third quarter and looking ahead into the remainder of the year.
The third quarter is off to a great start with 591 closings in July, up 93% from the 306 closings in July of last year. To put this in perspective, in July of 2010, the not-so-distant past, we closed 18 homes. The 591 closings this year came from 76 active selling communities, resulting in a very solid absorption pace, averaging just over 7.8 closings per community per month. Based on the strength of our July closings and the continued demand we are seeing from customers wanting to go from a rental situation to home ownership, we are increasing our closing guidance for 2017 from more than 4,700 homes closed to more than 5,000 homes closed.”
So even though the big bad wolf is going to huff and puff all he wants, these LGI homes are not made of straw. The new owners will be partying by the chimney in their brand new homes. $$$MR. MARKET$$$ is going to make good on this trade and proceeds from this stock winner will go towards Hurricane Relief efforts in the USVI and Puerto Rico. They are islands surrounded by great big oceans, and they need our help.
I am HUGE!
$$$MR. MARKET$$$
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