Corporate Insiders at Alcoa Inc. (AA) and Two Other Battered Companies Keep Buying Shares

Struggling Home Builder Receives Vote of Confidence from Board Member

Hovnanian Enterprises Inc. (NYSE:HOV) also had a Board member buy a sizable block of shares last week. According to a Form 4 filing recently submitted with the SEC, Director Vincent Pagano Jr. purchased 14,535 Class A shares last Thursday at prices that ranged from $1.73 to $1.74 per share, which increased his ownership to 111,688 shares.

The shares of the home builder have declined 49% in the past 12 months, partly owing to troubles caused by its weak balance sheet. The company has $86.5 million principal amount of 7.5% Senior Notes due on May 15, 2016, as well as $121.0 million principal amount of 8.625% Senior Notes due on January 15, 2017. Although the company has previously planned to refinance these notes, Hovnanian Enterprises recently asserted that the extremely challenging environment in the high yields market hinders the company from refinancing those obligations. Instead, the home builder plans to exit its Minneapolis, MN and Raleigh, NC operations by selling its land portfolios in those markets in an attempt to deleverage its balance sheet. Moreover, the company also plans to wind down its operations in the San Francisco Bay area in Northern California and in Tampa, FL.

Just recently, analysts at Deutsche Bank decreased the price target on Hovnanian Enterprises to $2 from $2.40 and reiterated the ‘Hold’ rating, citing balance sheet issues and lack of growth. After paying off approximately $233.5 million of debt that matured at the end of 2015 and early 2016, the company’s cash and cash equivalents were $147.1 million at the end of January. The management anticipates fiscal 2016 total revenues in the range of $2.7 billion-to-$3.1 billion. A total of ten hedge funds tracked by Insider Monkey were invested in the home builder at the end of December. Russell Lucas’ Lucas Capital Management upped its stake in Hovnanian Enterprises Inc. (NYSE:HOV) by 6% during the March quarter to 138,447 shares.

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