Is First American Financial Corp (NYSE:FAF) undervalued? Investors who are in the know are becoming hopeful. The number of bullish hedge fund positions inched up by 7 recently.
To most stock holders, hedge funds are perceived as underperforming, old financial tools of years past. While there are over 8000 funds trading at the moment, we at Insider Monkey hone in on the moguls of this group, about 450 funds. It is widely believed that this group has its hands on most of the hedge fund industry’s total capital, and by paying attention to their best stock picks, we have determined a number of investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (see the details here).
Just as integral, positive insider trading activity is a second way to break down the stock market universe. As the old adage goes: there are many incentives for a corporate insider to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this method if piggybackers understand what to do (learn more here).
Keeping this in mind, it’s important to take a peek at the recent action encompassing First American Financial Corp (NYSE:FAF).
What does the smart money think about First American Financial Corp (NYSE:FAF)?
At year’s end, a total of 28 of the hedge funds we track held long positions in this stock, a change of 33% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially.
According to our comprehensive database, Ariel Investments, managed by John W. Rogers, holds the most valuable position in First American Financial Corp (NYSE:FAF). Ariel Investments has a $192 million billion position in the stock, comprising 4% of its 13F portfolio. Coming in second is Samlyn Capital, managed by Robert Pohly, which held a $23 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Some other peers that are bullish include Donald Chiboucis’s Columbus Circle Investors, Crispin Odey’s Odey Asset Management Group and Chuck Royce’s Royce & Associates.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Columbus Circle Investors, managed by Donald Chiboucis, initiated the biggest position in First American Financial Corp (NYSE:FAF). Columbus Circle Investors had 17 million invested in the company at the end of the quarter. Jacob Doft’s Highline Capital Management also initiated a $9 million position during the quarter. The other funds with brand new FAF positions are Curtis Macnguyen’s Ivory Capital (Investment Mgmt), Israel Englander’s Millennium Management, and Jim Simons’s Renaissance Technologies.
What do corporate executives and insiders think about First American Financial Corp (NYSE:FAF)?
Bullish insider trading is best served when the company in focus has experienced transactions within the past half-year. Over the latest half-year time frame, First American Financial Corp (NYSE:FAF) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).
With the returns exhibited by Insider Monkey’s time-tested strategies, everyday investors should always watch hedge fund and insider trading sentiment, and First American Financial Corp (NYSE:FAF) shareholders fit into this picture quite nicely.
Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.