Insiders At Hovnanian Enterprises Sold US$24m In Stock, Alluding To Potential Weakness

In the last year, many Hovnanian Enterprises, Inc. (NYSE:HOV) insiders sold a substantial stake in the company which may have sparked shareholders' attention. When evaluating insider transactions, knowing whether insiders are buying is usually more beneficial than knowing whether they are selling, as the latter can be open to many interpretations. However, shareholders should take a deeper look if several insiders are selling stock over a specific time period.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Hovnanian Enterprises

Hovnanian Enterprises Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the President, Ara Hovnanian, sold US$4.6m worth of shares at a price of US$237 per share. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. The silver lining is that this sell-down took place above the latest price (US$118). So it is hard to draw any strong conclusion from it.

In the last year Hovnanian Enterprises insiders didn't buy any company stock. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. By clicking on the graph below, you can see the precise details of each insider transaction!

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: Most of them are flying under the radar).

Hovnanian Enterprises Insiders Are Selling The Stock

The last three months saw significant insider selling at Hovnanian Enterprises. In total, insiders sold US$740k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.

Insider Ownership Of Hovnanian Enterprises

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Hovnanian Enterprises insiders own about US$172m worth of shares (which is 24% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Hovnanian Enterprises Tell Us?

Insiders haven't bought Hovnanian Enterprises stock in the last three months, but there was some selling. And even if we look at the last year, we didn't see any purchases. But since Hovnanian Enterprises is profitable and growing, we're not too worried by this. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. Every company has risks, and we've spotted 2 warning signs for Hovnanian Enterprises (of which 1 makes us a bit uncomfortable!) you should know about.

Of course Hovnanian Enterprises may not be the best stock to buy. So you may wish to see this free collection of high quality companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.