Hovnanian Chairman Shows the Midas Touch

Within each sector of the market, there are certain individuals whose success has earned them a reputation that when they speak or act, people listen.  Every move or comment that Warren Buffett makes is analyzed for potential clues as to what companies he may be interested in buying.  More specifically, in the energy sector, when T. Boone Pickens makes comments on where he thinks the price of oil is going, his words move the market and are carried by all the major news outlets. 

While most people may not be aware of it, the homebuilding sector has its own "EF Hutton", as in when this person speaks (or acts), people should listen.  The chart below shows the price of homebuilding stock Hovnanian Eneterprises (HOV) since October 2004.  We also highlight large insider buys and sells by the company's chairman Kevork Hovnanian. 

As shown, from October 2004 through July 2005, the chairman sold over 800K shares near the peak of the housing boom for total proceeds of almost $54 million.  After a decline from $70 per share to under $5 in January, Mr. Hovnanian decided to start buying back what he sold in '05.  So far this year, he has bought back nearly 75% of the stock he sold, for over 90% less than he originally sold it for!  And his purchases this year have both been at or near short-term bottoms as well.  Talk about buy low, sell high.

click to enlarge

Comments

[Calvin C.:]

Smart guy

2008 Jul 21 03:11 PM

[Pickings:]

Looks like he's just put a toe in the water. Guessing the bottom of the graph, he sold for $54m and has bought 600k*$5 = ~$3m. So he's still got 95% of his profits parked elsewhere. Probably anticipating more carnage by my guess...

2008 Jul 21 07:35 PM

[nobull:]

Isnt he the same guy who came on numerous shows on CNBC back in 2006 insisting housing boom will go on for forever. All the while he was quietly unloading his own company stock. Same with Toll Brothers. Shameful if not criminal. And ofcourse the dumb anchors at CNBC ate it all, lavishing praise on them.

2008 Jul 22 09:15 AM

[wpdragon:]

Heh, nobull beat me to it... he was indeed the same guy, and yes the Toll brothers did the exact same thing, altho on a somewhat larger scale... and Hovnanian now has rock star status on cnbc.

And also, now Mr. Hovnanian wants the federal government to bail out the homebuilders and enrich him once again... despicable!!!!!!!!!!!

2008 Jul 22 09:30 AM

[notsosmart:]

cmon folks. its all grrrreed,crookedness,&... behavior.when are you going to learn-believe nobody or anybody.think for yourself. i bailed @ 14,000dj because all around me people were getting mortgages & helocs that were not qualified.friends went into the mortgage business,making good money,but not knowing anything about the business.it was unbelievable to me.all this stems from wash.dc.you have to check insider trading before buying anything.its not foolproof but a good indicator.

2008 Jul 22 09:57 AM

[notsosmart:]

re above-unethical behavior

2008 Jul 22 09:58 AM

[joof:]

Selling overvalued stock is NOT unethical

Buying undervalued stock is NOT unethical

Losing money is stoopid

2008 Jul 22 12:11 PM

[notsosmart:]

asking the taxpayer to bail you out is unethical.selling your own stock while telling all who liste that they should buy is unethical.i could be wrong.

2008 Jul 22 12:38 PM

[PhillyD:]

jf is stupid is he thinks that selling high is ethical while you're telling the nation to buy high. That makes someone a 'liar' or 'snake oil salesman' - not someone to honor.

2008 Jul 24 09:05 AM