Ensemble Capital Thinks that First American (FAF) Will Rebound Greatly

Ensemble Capital Management, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. In the letter, they discussed the whole year performance of the fund in 2020 and also gave insights on the investment decisions they’ve made last year. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Ensemble Capital Management, in their Q4 2020 Investor Letter said that they consider First American Financial Corporation (NYSE: FAF) as one of the detractors from their performance. First American Financial Corporation is an insurance company that currently has a $5.8 billion market cap. For the past 3 months, FAF delivered a decent 17.27% return and settled at $52.29 per share at the closing of January 29th.

Here is what Ensemble Capital Management has to say about First American Financial Corporation in their investor letter:

“A notable detractor from our performance came from our investment in First American Financial Corporation. The stock of this title insurance company is our only holding that generated negative returns in 2020. With the company generating revenue from both existing and new home transactions, we think it will benefit greatly from our thesis that home activity has been depressed and will increase significantly in the years ahead. The stock rebounded from the pandemic driven sell off from March to July but has been relatively flat since then. It generated a return of just over 2% in the fourth quarter. While there are some valid concerns about an outstanding legal case related to a cybersecurity breach in 2019, the stock trades at just nine times its pre-pandemic 2019 reported earnings.”

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Last December 2020, we published an article telling that First American Financial Corporation (NYSE: FAF) was in 42 hedge fund portfolios. Its all time high statistics is 44. FAF delivered a decent -15.63% return in the past 12 months.

Our calculations show that First American Financial Corporation (NYSE: FAF) does not belong in our list of the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.