Shares of Hovnanian Enterprises, the No. 6 U.S. home builder, rose sharply Friday as rumors swirled that Warren Buffett's Berkshire Hathaway would buy an interest in the struggling home builder.
"There is talk that Warren Buffett is buying a stake in Hovnanian," said Jon Najarian, co-founder of optionmonster.com. "We think such a move by Buffett would clearly signal a bottom is finally in or near this battered housing sector."
Hovnanian shares were among the top percent gainers on the New York Stock Exchange.
That helped other home-builder shares climb including Standard Pacific and KB Home.
"That's what's driving it and of course many of these stocks are heavily shorted so any type of rumors gets the shorts to immediately start covering," Jim Wilson, JMP Securities analyst said.
The Dow Jones U.S. Home Construction Index, a yardstick that measures home builder performance, rose more than 3%.
Buffett was not immediately available for comment. His assistant, Debbie Bosanek, declined to comment, saying Berkshire does not discuss what it is buying or selling except when required.
Investors lately have taken interest in U.S. home builders.
Carl Icahn is in a battle to take over WCI Communities, a builder of high-end homes and condominiums chiefly in Florida.
Earlier this month, hedge fund Moore Capital disclosed a 5.08 percent stake in Beazer Homes USA Inc., the No. 7 U.S. home builder.
"It looks like housing stocks are trying to find a bottom as their bonds have firmed up. Investors believe the recent housing concerns might have been overblown," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.
Last month, Hovnanian Chief Financial Officer J. Larry Sorsby said at the Reuters Global Real Estate Summit that he believed merger-and-acquisition activity in the home-builder sector could return after the sagging U.S. housing market recovers.
"I think there will be opportunities once we can clearly see the market has bottomed," Sorsby said at the time. In May, Hovnanian posted a quarterly loss of $30.7 million, or 49 cents per share, compared with a profit of $101.0 million, or $1.55 a share, in the year-earlier quarter.
The company also withdrew its forecast for the year.
Since the start of the year, Hovnanian shares are down 47 percent, while the Dow Jones U.S. Home Construction Index is off 25 percent.