On Jan. 17th, Vincent Pagano Jr, Board Director at Hovnanian Enterprises, Inc. (NYSE:HOV), acquired 6,000 shares of Class A Common Stock. In two separate transactions, the insider paid $5.97 per share for the first 5,800 shares, and $5.965 per share, for the remaining 200. Following these moves, he owns 25,520 shares, worth more than $153,000.
Hovnanian Enterprises, Inc. (NYSE:HOV) designs, builds and sells residential homes, condominiums, and active adult homes in planned residential developments. On average, analysts consider this company’s stock as a hold case. Not only are its growth prospects limited, but also its valuation at 31 times its earnings, almost triples the residential construction industry average. In addition, its margins and returns are amongst the worst in the industry.
In fact, most insiders seem to recon these problems, as our database registers no insider purchases since 2010. However, Mr. Pagano evidently differs from this view, maybe motivated by some of Hovnanian Enterprises, Inc. (NYSE:HOV)’s latest announcements. The most relevant to this purchase might be the entry into a Material Definitive Agreement trough which the company “completed a private placement pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, of $150,000,000 aggregate principal amount of 7.000% Senior Notes due 2019, which are guaranteed by the Company and substantially all of its subsidiaries” (Sec.gov).
Furthermore, Mr. Pagano is not the only one betting on Hovnanian Enterprises, Inc. (NYSE:HOV). Randall Smith’s Alden Global Capital, upped its stakes in the company by about 17% over the quarter and holds 5.6 million shares (which account for approximately 10% of its equity portfolio’s value), according to the fund’s latest 13F. John Thiessen’s Vertex One Asset Management increased its position by 86% during the third quarter of last year and now holds about 1.05 million shares.
In fact, all of the top 5 hedge fund bulls on Hovnanian Enterprises, Inc. (NYSE:HOV) upped their stakes over the past six months. One last bull worth mentioning is Ken Griffin’s Citadel Investment Group, which increased its position by 21% and now owns 883,708 shares. So, despite the discouraging financial figures and valuation, why are these funds and Mr. Pagano betting on Hovnanian Enterprises, Inc. (NYSE:HOV)? And more importantly, should you? Certainly, further research is needed.
Disclosure: Javier Hasse holds no position in any stocks mentioned7