I have been quite bullish LGIH for a couple months based on
the monthly chart structure, fundamental strength + cheap valuation and have been stalking a proper entry point.
Fundamentally
the company is crushing growth numbers (EPS Q/Q +40%, Sales Q/Q +34%), P/S Ratio of 0.83, and trades at a 7 Forward P/E. They have seen Net purchases by large institutions in the last quarter of +10% of available shares.
Plus I happen to think this plays well into the increase in interest
rates, leading to more loans to first-time-home-buyers, which then they
build more homes, etc.
I have been watching Homebuilder stocks lately with this in mind but I have always
known them to be very choppy traders, that and they haven't gone anywhere in
years. The group is a mixed bag, some have decent growth, some don't.
None however come near LGIH numbers.
When
comparing the charts they also don't hold up well in comparison vs
LGIH. In the chart below LGHI (green) vs PHM, BZH, DHI, TOL, MHO.
LGIH is the clear leader in price performance as well.
The Weekly chart is breaking out here from two "inside bars" following the Bullish Engulfing bar which
closed over the 20 Week SMA for the first time since October 2016.
The Monthly is in a very strong posture as well. We are seeing a Bull Flag trigger over last month's high right off a rising 20 Month SMA. A simple Bull Flag measure shows an initial price target near the $49 area. Based on Growth numbers and Trend patterns I expect this to be a reasonable target.
Stops
will be wide, I want stops for Longs here on a Weekly basis below the Engulfing week's low at $27.25.
