Great week for Hovnanian Enterprises, Inc. (NYSE:HOV) institutional investors after losing 26% over the previous year

Key Insights

• Given the large stake in the stock by institutions, Hovnanian Enterprises' stock price might be vulnerable to their trading decisions
• The top 10 shareholders own 50% of the company
• Insiders own 25% of Hovnanian Enterprises

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Every investor in Hovnanian Enterprises, Inc. (NYSE:HOV) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 57% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors would appreciate the 13% increase in share price last week, given their one-year losses have totalled a disappointing 26%.

In the chart below, we zoom in on the different ownership groups of 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.

Hovnanian Enterprises already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Hovnanian Enterprises' earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hovnanian Enterprises is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Ara Hovnanian with 17% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 8.0% of common stock, and The Vanguard Group, Inc. holds about 5.3% of the company stock.

We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Hovnanian Enterprises

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

It seems insiders own a significant proportion of Hovnanian Enterprises, Inc.. Insiders own US$146m worth of shares in the US$589m company. 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

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hovnanian Enterprises. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Hovnanian Enterprises (at least 2 which are potentially serious) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.