LGI Homes (LGIH) Plunges 11.50% in Five Days Amid Rising Rates

LGI Homes (LGIH) shares fell 0.35% today, marking the fifth consecutive day of decline, with a total drop of 11.50% over the past five days. The share price hit its lowest level since April 2020, with an intraday decline of 2.30%.

The strategy of buying LGIH shares after they reached a recent low and holding for one week resulted in poor performance over the past five years. The strategy yielded a return of -4.10%, significantly underperforming the benchmark return of 50.02%. The excess return was -54.12%, and the CAGR was -1.75%. The strategy also had a high maximum drawdown of -53.09% and a Sharpe ratio of -0.04, indicating significant risk and negative returns.

LGI Homes, a prominent homebuilder in the United States, has been facing challenges due to rising interest rates and inflation. The company's stock has been under pressure as higher borrowing costs make it more difficult for potential homebuyers to afford new homes. This has led to a decrease in demand for new housing, which has negatively impacted LGI Homes' sales and earnings.

Additionally, the company has been dealing with supply chain disruptions, which have caused delays in construction and increased costs. These issues have further weighed on LGI Homes' stock price, as investors become increasingly concerned about the company's ability to navigate these challenges.

Despite these challenges, LGI Homes has taken steps to mitigate the impact of rising interest rates and supply chain disruptions. The company has been focusing on building more affordable homes and has been working to improve its supply chain efficiency. However, it remains to be seen whether these efforts will be enough to turn around the company's stock price in the near term.