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Could Hovnanian Enterprises, Inc.'s (NYSE:HOV) Investor Composition Influence The Stock Price?

Simply Wall St

If you want to know who really controls Hovnanian Enterprises, Inc. (NYSE:HOV), then you'll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

Hovnanian Enterprises is not a large company by global standards. It has a market capitalization of US$136m, which means it wouldn't have the attention of many institutional investors. In the chart below below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about HOV.

View our latest analysis for Hovnanian Enterprises

NYSE:HOV Ownership Summary, November 11th 2019

What Does The Institutional Ownership Tell Us About Hovnanian Enterprises?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors own 23% of Hovnanian Enterprises. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Hovnanian Enterprises, (below). Of course, keep in mind that there are other factors to consider, too.

NYSE:HOV Income Statement, November 11th 2019

Hedge funds don't have many shares in Hovnanian Enterprises. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Hovnanian Enterprises

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in Hovnanian Enterprises, Inc.. Insiders own US$15m worth of shares in the US$136m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 62% of Hovnanian Enterprises shares. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

We can see that Private Companies own 3.3%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.