Ariel Investments, an investment management company, released its “Ariel Small Cap Value Strategy” first quarter 2025 investor letter. A copy of the letter can be downloaded here. Investors’ optimism for another year of U.S. outperformance, fueled by economic momentum and the new administration’s pro-business stance, was overshadowed by tariff fears and policy uncertainty. In the quarter, Ariel Small Cap Value Tax-Exempt Composite decreased -10.60% gross of fees (-10.73% net of fees), against this backdrop, compared to -7.74% and -9.48% returns of the Russell 2000 Value Index and the Russell 2000 Index, respectively. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its first-quarter 2025 investor letter, Ariel Small Cap Value Strategy highlighted stocks such as First American Financial Corporation (NYSE:FAF). First American Financial Corporation (NYSE:FAF) is a financial services company. The one-month return of First American Financial Corporation (NYSE:FAF) was -0.76%, and its shares gained 10.60% of their value over the last 52 weeks. On June 16, 2025, First American Financial Corporation (NYSE:FAF) stock closed at $58.75 per share, with a market capitalization of $6.045 billion.
Ariel Small Cap Value Strategy stated the following regarding First American Financial Corporation (NYSE:FAF) in its Q1 2025 investor letter:
“Title insurer, First American Financial Corporation (NYSE:FAF), also advanced in the period as earnings exceeded expectations driven by strong commercial revenue growth, higher title premiums and net investment income as well as solid cost containment. Despite a challenging year for the industry, management continues to make considerable progress with its strategic initiatives, while remaining focused on expense management and optimizing its use of technology. Although FAF expects mortgage rates to remain elevated in 2025, the company anticipates a modest improvement in both the residential purchase and refinance businesses. Meanwhile, the commercial business is off to a strong start. 2025 should represent another year of earnings improvement even amidst market uncertainty. In our view, investors continue to underappreciate FAF’s scale, operating leverage and investment portfolio.”
A modern office tower overlooking a city skyline, illustrating the power of its financial services division.
First American Financial Corporation (NYSE:FAF) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held First American Financial Corporation (NYSE:FAF) at the end of the first quarter, which was 28 in the previous quarter. While we acknowledge the potential of First American Financial Corporation (NYSE:FAF) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.
In another article, we covered First American Financial Corporation (NYSE:FAF) and shared the list of best stocks to buy according to John W. Rogers of Ariel Investments. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of FAF as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
