Is LGI Homes (LGIH) a Smart Long-Term Buy?

Saga Partners, an investment management firm, published its second-quarter 2022investor letter – a copy of which can be seen here. During the second quarter of 2022, the Saga Portfolio (“the Portfolio”) declined 56.3% net of fees. This compares to the overall decrease for the S&P 500 Index, including dividends, of 16.1%. The cumulative return since inception on January 1, 2017, for the Saga Portfolio, is -7.3% net of fees compared to the S&P 500 Index of 86.8%. The annualized return since inception for the Saga Portfolio is -1.4% net of fees compared to the S&P 500’s 12.0%. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Saga Partners mentioned LGI Homes, Inc. (NASDAQ:LGIH) and explained its insights for the company. Founded in 2003, LGI Homes, Inc. (NASDAQ:LGIH) is a Texas-based construction company with a $2.2 billion market capitalization. LGI Homes, Inc. (NASDAQ:LGIH) delivered a -38.63% return since the beginning of the year, while its 12-month returns are down by -37.25%. The stock closed at $94.81 per share on September 12, 2022.

Here is what Saga Partners has to say about LGI Homes, Inc. (NASDAQ:LGIH) in its Q2 2022 investor letter:

“LGI Homes should be a familiar name. The Portfolio first bought LGI in Q1’17 and then sold it during Q1’21 to take advantage of other opportunities that appeared relatively more attractive. Subsequently, shares increased over 50% from our sell price, only strengthening belief in our inability to time tops and bottoms. As shares declined this year as a potential reaction to LGI’s supply chain headwinds and a greater aversion to housing related stocks, we are excited to be owners again.

LGI builds and sells standardized entry-level, single-family homes at attractive prices. Their competitive advantage comes from numerous integrated processes that all work together to drive building quality homes fast and at low price points. There is no proprietary technology or knowledge, but LGI has integrated around a very specific job to be done, which is very difficult for any other homebuilder to replicate, resulting in industry-leading growth and returns on equity…” (Click here to see the full text)

Our calculations show that LGI Homes, Inc. (NASDAQ:LGIH) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. LGI Homes, Inc. (NASDAQ:LGIH) was in 17 hedge fund portfolios at the end of the second quarter of 2022, compared to 22 funds in the previous quarter. LGI Homes, Inc. (NASDAQ:LGIH) delivered a 13.45% return in the past 3 months.

In July 2022, we also shared another hedge fund’s views on LGI Homes, Inc. (NASDAQ:LGIH) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

Disclosure: None. This article is originally published at Insider Monkey.