Institutional investors control 57% of Hovnanian Enterprises, Inc. (NYSE:HOV) and were rewarded last week after stock increased 5.7%

Key Insights

• Institutions' substantial holdings in Hovnanian Enterprises implies that they have significant influence over the company's share price
• 52% of the business is held by the top 14 shareholders
• Recent sales by insiders

To get a sense of who is truly in control of Hovnanian Enterprises, Inc. (NYSE:HOV), it is important to understand the ownership structure of the business. With 57% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, institutional investors ended up benefitting the most after the company hit US$1.1b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 126%.

Let's take a closer look to see what the different types of shareholders can tell us about Hovnanian Enterprises.

View our latest analysis for Hovnanian Enterprises

What Does The Institutional Ownership Tell Us About Hovnanian Enterprises?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Hovnanian Enterprises already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hovnanian Enterprises is not owned by hedge funds. With a 13% stake, CEO Ara Hovnanian is the largest shareholder. For context, the second largest shareholder holds about 6.4% of the shares outstanding, followed by an ownership of 5.4% by the third-largest shareholder.

After doing some more digging, we found that the top 14 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Hovnanian Enterprises

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of Hovnanian Enterprises, Inc.. Insiders own US$218m worth of shares in the US$1.1b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hovnanian Enterprises. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Hovnanian Enterprises has 2 warning signs (and 1 which is concerning) we think you should know about.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

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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.