Institutional investors in Hovnanian Enterprises, Inc. (NYSE:HOV) lost 8.6% last week but have reaped the benefits of longer-term growth

Key Insights

• Institutions' substantial holdings in Hovnanian Enterprises implies that they have significant influence over the company's share price
• 51% of the business is held by the top 15 shareholders
• Insiders have sold recently

A look at the shareholders of Hovnanian Enterprises, Inc. (NYSE:HOV) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 8.6% in value last week. However, the 186% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

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?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in 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.

Hovnanian Enterprises is not owned by hedge funds. With a 18% stake, CEO Ara Hovnanian is the largest shareholder. BlackRock, Inc. is the second largest shareholder owning 5.6% of common stock, and The Vanguard Group, Inc. holds about 4.3% of the company stock.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 15 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 have a US$209m stake in this US$918m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 28% stake in the company, and hence can't easily be ignored. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Hovnanian Enterprises is showing 3 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.