The Buffett Premium

There was recent speculation that Warren Buffett was interested in purchasing a stake in Hovnanian Enterprises, a homebuilding firm. It's nothing new to hear about a new purchase by the company. What was interesting to me was what this article calls "The Buffett Premium." That's what happens when the stock price of a company rises when there is news of a possible purchase by Buffett.

It is also worth noting that the building industry is currently in a slump due to the low housing market. Even in these conditions, Buffett is willing to buy, as the article states:

The homebuilding industry is currently one of the worst-performing sectors out there, and that's where you'll always find Buffett, swooping in to buy what no one else wants, at big discounts. In other words, Mr. Market's famous mood swings might very well be causing him to once again offer some sound businesses at bargain-basement prices.