Friday, August 14, 2009

Make Money in the HOV Lane

They say time heals all wounds, and right now some of the stocks the market wrote off last year are coming back with strength. The financials. The retailers. Even -- gasp -- housing stocks. One of our favorites is Hovnanian Enterprises, Inc. (HOV), which designs, constructs, markets and sells single-family homes, townhomes, condominiums, mid-rise and high-rise condominiums, urban infill, and active adult planned residential developments.

HOV's homebuilding operations consist of six segments: Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West. Its financial services operations provide mortgage loans and title services to the customers of its homebuilding operations. As of October 31, 2008, the Company offered homes for sale in 284 communities in 44 markets in 18 states throughout the United States.

Why would I like HOV? The housing market is still on its ass. Prices are falling. Unemployment is rising. Who the heck can afford a new home?

All good questions. We just think last month's statistics showed the bottom is here. First rise in prices in 30 months. Plus, HOV began preparing for this fiasco back in 2006 when they started selling off inventory and not adding to their backlist of new projects. They've been building cash for two years.

More important, HOV just bought back about $375 million worth of their outstanding bonds -- at prices around 60 cents on the dollar. Think about it. The company feels strong enough to go out in the market and make a tender offer for their sharply depressed bonds ... think that's somebody about to go out of business?

We're looking for a double over the next 12 months.

1 comment:

Son #1 said...

nice 1