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Hovnanian Enterprise ( HOV)

Background: Hovnanian Enterprises designs, constructs, markets and sells residential homes in the U.S. It constructs single-family attached and detached homes, attached townhomes and condominiums, and urban infill and active adult homes. Founded in 1959, it is headquartered in Red Bank, N.J. Hovnanian Enterprise trades an average of 6 million shares per day with a market cap of $493 million.

52-Week High: $4.03

In the last month, the stock has really moved higher with a 20.3% increase. Cheap stocks can have impressive moves percentage-wise, but any stock under $5 is typically a bankruptcy candidate.

Taken as a whole, the analysts are not bestowing much in terms of market direction. Five out of 11 rate Hovnanian a hold. One recommends this company as a buy, and five recommend selling. The stock appreciated 257% during the last year, and the average analyst target price for Hovnanian is $2.82.

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Hovnanian is in a bull trend, and looks ready to break higher. The moving averages are moving higher, and shareholders should be happy (at least the relatively newer ones). Hovnanian is almost a bet on the Fed. If the billions of dollars keep flowing, housing should, in theory, pick up. The dollar may be worth less than a roll of Charmin, and a six-pack of beer may cost $50, but your mortgage will likely no longer be underwater.

The short interest is not small for sure. When more than one out of every four shares available to trade is short, short-sellers are smelling blood. The current float short is 26.9%.

If you believe QE3 is going to work, Hovnanian could pay off handsomely. After all, it traded for over $35 a share as recently as 2007. If you do want to gain exposure here, look for an entry near $3.45.

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