First American Financial Corp (FAF): Hedge Funds and Insiders Are Bearish, What Should You Do?

First American Financial Corp (NYSE:FAF) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months.

In the 21st century investor’s toolkit, there are a multitude of metrics shareholders can use to track publicly traded companies. Two of the best are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a superb margin (see just how much).

Equally as integral, bullish insider trading activity is a second way to parse down the investments you’re interested in. As the old adage goes: there are a number of reasons for an executive to cut shares of his or her company, but only one, very clear reason why they would behave bullishly. Many empirical studies have demonstrated the valuable potential of this strategy if you know what to do (learn more here).

Keeping this in mind, we’re going to take a glance at the key action regarding First American Financial Corp (NYSE:FAF).

What does the smart money think about First American Financial Corp (NYSE:FAF)?

Heading into Q2, a total of 26 of the hedge funds we track were bullish in this stock, a change of -10% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly.

Of the funds we track, John W. Rogers’s Ariel Investments had the largest position in First American Financial Corp (NYSE:FAF), worth close to $189.6 million, comprising 3.3% of its total 13F portfolio. The second largest stake is held by Crispin Odey of Odey Asset Management Group, with a $50.9 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Robert Pohly’s Samlyn Capital and Ken Griffin’s Citadel Investment Group.

Since First American Financial Corp (NYSE:FAF) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds that elected to cut their full holdings heading into Q2. It’s worth mentioning that Donald Chiboucis’s Columbus Circle Investors said goodbye to the largest stake of the “upper crust” of funds we track, valued at about $17.4 million in stock.. Jacob Doft’s fund, Highline Capital Management, also said goodbye to its stock, about $9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q2.

What do corporate executives and insiders think about First American Financial Corp (NYSE:FAF)?

Bullish insider trading is best served when the primary stock in question has seen transactions within the past 180 days. Over the latest six-month time frame, First American Financial Corp (NYSE:FAF) has seen zero unique insiders buying, and 4 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to First American Financial Corp (NYSE:FAF). These stocks are Allied World Assurance Co Holdings, AG. (NYSE:AWH), Alterra Capital Holdings Ltd (NASDAQ:ALTE), Corelogic Inc (NYSE:CLGX), ProAssurance Corporation (NYSE:PRA), and Aspen Insurance Holdings Limited (NYSE:AHL). All of these stocks are in the property & casualty insurance industry and their market caps match FAF’s market cap.