Within each sector of the market, there are certain individuals whose success has earned them a reputation that when they speak or act, people listen. Every move or comment that Warren Buffett makes is analyzed for potential clues as to what companies he may be interested in buying. More specifically, in the energy sector, when Boone Pickens makes comments on where he thinks the price of oil is going, his words move the market and are carried by all the major news outlets.
While most people may not be aware of it, the homebuilding sector has its own "EF Hutton", as in when this person speaks (or acts), people should listen. The chart below shows the price of homebuilding stock Hovnanian Eneterprises (HOV) since October 2004. We also highlight large insider buys and sells by the company's chairman Kevork Hovnanian. As shown, from October 2004 through July 2005, the chairman sold over 800K shares near the peak of the housing boom for total proceeds of almost $54 million. After a decline from $70 per share to under $5 in January, Mr. Hovnanian decided to start buying back what he sold in '05. So far this year, he has bought back nearly 75% of the stock he sold, for over 90% less than he originally sold it for! And his purchases this year have both been at or near short-term bottoms as well. Talk about buy low, sell high.