(This is an excerpt from an article I originally published on Seeking Alpha on September 10, 2015. Click here to read the entire piece.)
I always get nervous when a rush occurs on a stock with a swell of late entrants to a good story. LGI Homes (LGIH), a homebuilder with a heavy concentration of business in Texas, has recently received a LOT of buying attention.
Source: FreeStockCharts.com
When I first wrote about LGIH last November, I never imagined this kind of move – especially relative to the gains in other homebuilders. LGIH is up 87.7% year-to-date while the iShares U.S. Home Construction ETF (ITB) is up a more modest, yet market-beating 8.4%.
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LGIH has adopted the profile of a momentum stock where a strong upward trend attracts buyers which in turn reinforces the strong upward trend. {snip}
Last week, Investor’s Business Daily helped me to at least partly understand the current pace of gains. {snip}
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I know the standard investing/trading rule commands us to sell our losers and hold our winners, but I think risk management speaks even louder in this case. Moreover when it comes to housing and homebuilder stocks, I am much more of a contrarian than a trend follower. {snip}
Be careful out there!
Full disclosure: long LGIH
(This is an excerpt from an article I originally published on Seeking Alpha on September 10, 2015. Click here to read the entire piece.)