Hovnanian Rises Amid Talk of Buffett Bid

Red Bank, NJ, July 13, 2007--Shares of homebuilder Hovnanian Enterprises shot up Friday amid press reports that Warren Buffett's Berkshire Hathaway Inc. might be eyeing the company.

Shares of Hovnanian rose $1.98, or nearly 12 percent, to $18.53 Friday. The stock was up slightly in after-hours trading, shortly after 5 p.m.

Buffett's assistant Debbie Bosanek declined to comment on the situation, citing a company policy not to discuss company activities unless legally required to do so. A Hovnanian spokesman didn't immediately have a comment on the stock's rise in value.

Hovnanian, like other companies in the industry, has suffered a downturn in the housing market, leading to a situation in which stock prices could be undervalued. Hovnanian shares were trading around $70 per share in mid-2005.

But some who follow Buffett's activities warned that the rumors of a Hovnanian takeover may be just that: rumors.

"I've covered him for 20 years, and I've seen these rumors, thousands of them, and very rarely are they true," said Andy Kilpatrick, a Birmingham, Ala., stockbroker and author of "Of Permanent Value, the Story of Warren Buffett."

With Omaha, Neb.-based Berkshire Hathaway controlling Home Services of America, one of the largest real estate brokerage firms in the country, Buffett might not be interested in getting into the business of building homes, according to Justin Fuller, an analyst who follows Berkshire Hathaway at Chicago-based Morningstar Inc.

"In the past, he's said he'd rather take a piece of the transactions, because he wouldn't want direct exposure to transactions in the real estate market," Fuller said.

The housing industry has been suffering this year amid problems in the subprime mortgage market. Markets that were once red-hot have seen declining sales and falling prices.

Hovnanian lost $30.7 million, or 49 cents per share, for the three months ended April 30, after paying preferred stock dividends. That compared with a profit of $101 million, or $1.55 per share, in the same period a year ago.

The company builds homes in 17 states including California, Florida, New Jersey and New York.

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