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Tale of the Tape

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

One such stock that you may want to consider dropping is Hovnanian Enterprises Inc. (HOV - Snapshot Report), which has witnessed a significant price decline in the past four weeks, and it has seen negative earnings estimate revisions for the current quarter and the current year. A Zacks Rank #4 (Sell) further confirms weakness in HOV.

A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen 4 estimates moving down in the past 30 days, compared with no upward revision. This trend has caused the consensus estimate to trend lower, going from 43 cents a share a month ago to its current level of 25 cents.

Also, for the current quarter, Hovnanian has seen 3 downward estimate revisions versus no revision in the opposite direction, dragging the consensus estimate down to 3 cents a share from 6 cents over the past 30 days.   

The stock also has seen some pretty dismal trading lately, as the share price has dropped 16.49% in the past month.

So it may not be a good decision to keep this stock in your portfolio anymore, at least if you don’t have a long time horizon to wait.

If you are still interested in the Residential and Commercial Building sector, you may instead consider some better-ranked stocks including DR Horton Inc. (DHI), NVR, Inc. (NVR) and Beazer Homes USA Inc. (BZH). DR Horton and NVR hold a Zacks Rank #2 (Buy) while Beazer Homes holds a Zacks Rank#3 (Hold). These stocks may be better selections at this time.

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