Shares of homebuilder LGI Homes Inc (NASDAQ: LGIH) are trading lower Monday morning after a report by Hunterbrook Media accused the company of luring renters into buying homes they cannot afford through deceptive marketing and aggressive sales tactics.
What To Know: The report, titled “Buyer’s Remorse,” alleges LGI Homes targets low-income individuals with ads for unrealistically low monthly payments that omit significant costs like taxes, insurance and HOA fees.
Benzinga has reached out to LGI Homes for comment on the report.
This practice can result in actual payments being 30% to 70% higher than advertised. An analysis within the report found that LGI homeowners were four times more likely to face foreclosure than typical FHA borrowers.
According to the investigation, LGI’s business model relies on a strategy of converting renters into buyers. However, the report claims this model is under strain, citing a 30% decrease in revenue this year compared to 2021 and a 45% drop in home sales. The report also claims it found that LGI prices its homes 28% higher per square foot on average than competitors.
Benzinga Edge Rankings: Despite the stock’s volatility Monday, Benzinga Edge rankings suggest it may be undervalued, giving it a high Value score of 89.62.
LGIH Price Action: LGI Homes shares were down 1.69% at $51.13 at the time of publication Monday, according to Benzinga Pro. Over the past month, LGIH has declined about 15.6% versus a 4.3% rise in the S&P 500 and is down roughly 44% year-to-date compared to the index’s 12.8% gain.
How To Buy LGIH Stock
By now you’re likely curious about how to participate in the market for LGI Homes – be it to purchase shares, or even attempt to bet against the company.
Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy “fractional shares,” which allows you to own portions of stock without buying an entire share.
In the case of LGI Homes, which is trading at $51.52 as of publishing time, $100 would buy you 1.94 shares of stock.
If you’re looking to bet against a company, the process is more complex. You’ll need access to an options trading platform, or a broker who will allow you to “go short” a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.
Image: Courtesy of LGI Homes