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Back in June of last year, I wrote a blog pick recommending Hovnanian Enterprises, Inc. (NYSE: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
HOV

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