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Back in June of last year, I wrote a blog pick recommending Hovnanian Enterprises, Inc. (HOV) despite all the fears about rising interest rates, falling real estate values, and the general sense that the bubble had burst. At the time, I wrote that HOV was a more savvy, more diversified homebuilder than most of its competition and that a downswing was a good time to get a stock at a discount.

If you followed my advice then and bought around $30, you would have seen the stock drop to around $25 over the summer, and then climb its way back above $35 and toward $40. It's now around $35.

I still think HOV is a very smart company and I like the fact that it has a large number of orders in the pipeline and land options that decrease its risk and capital costs. It has been acquiring a lot of companies to give it better economies of scale. My guess is it won't be hit as hard by real estate woes as its competitors will be.

But I wouldn't get into this stock right now. Recent real estate reports have looked quite glum, with new construction down 14% in January to the lowest levels since August 1997. Existing home sales have dropped in 40 states. Most urban markets are having a tough time. While we may not see any catastrophic collapse in real estate, the market is clearly going to take a while to come out of its funk, and with interest rates remaining high because of a strong economy, it doesn't look like we'll see any growth driven by falling mortgage costs.

But keep your eye on this one; it's a great company if you can grab it at a discount.

Type of stock: A diversified and well-managed homebuilder that is being brought down by industry-wide doldrums.

Price target: I still think this is a good buy around $30, and certainly if it gets into the $20s, as long as you can be patient and hold the company until the sector rebounds. It might be a year or two, but it will grow again.

HOV 1-yr chart

Source: Hovnanian Enterprises: One to Hold For the Housing Sector Rebound