41.75 -0.6 (-1.44%) Buy

Don't go shopping for LGIH now, it is underperforming the market

13 min read

LGI HOMES, INC. is a falling knife that can bleed you if you catch it today. It delivered -1.44% to close at 41.75. It's recent 5 day performance has been +0.62%, -1.89%, -3.38%, +0.66% and +7.64%.

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LGIH showed a strong bearish trend over the last 3 months. During this period LGIH delivered -15.49% and saw a maximum drawdown of -25.22%. There was a short signal during this period which returned +10.83%.


LGIH has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 3 Feb, 2016 to 3 Jan, 2018. Over the last 2 years 11 months and 9 days, LGIH outperformed the SP500 index on 53% days.

LGIH returned losses on 54% days in the last three months. During this time, it delivered on average -0.21% per day. It delivered it's worst daily return of -12.88%, during this period, on Tuesday, 6 Nov, 2018. The longest stort-term trend during this period was 8 losing days, which started on 25 Sep, 2018 and ended on 4 Oct, 2018. This bearish trend lost -20.83% of investor capital.

The last 12 months saw LGIH's investors making profits in 4 months and incurring losses in 8 months. LGIH was less consistent in delivering monthly returs than SP500 index. LGIH significantly outperformed SP500 index in Mar 2018, when it returned +24.7% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. LGIH had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from May 2018 to Jul 2018) during which period it delivered -27.94%.

You must gain control over your money or the lack of it will forever control you.
-- Dave Ramsey

LGIH is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in LGIH's volatility from 25 Sep, 2018 to 6 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that LGIH has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

SP500 index has more chance of extreme outcomes than LGIH. Therefore, SP500 must receive a lower allocation than LGIH in your portfolio. SP500 index usually has shorter drawdown period than LGIH.

On a general note (since you are interested in LGIH), TWTR is a mid cap that deserves to be closely tracked for investment opportunities.

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