Is First American Financial Corp (NYSE:FAF) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They fail miserably sometimes but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
First American Financial Corp (NYSE:FAF) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of the third quarter of 2016. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Jones Lang LaSalle Inc (NYSE:JLL), Graco Inc. (NYSE:GGG), and AMC Networks Inc (NASDAQ:AMCX) to gather more data points.
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What does the smart money think about First American Financial Corp (NYSE:FAF)?
At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. The flat showing comes after two quarters in which ownership of the stock surged by more than 70% total. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ariel Investments, managed by John W. Rogers, holds the biggest position in First American Financial Corp (NYSE:FAF). Ariel Investments has a $216.4 million position in the stock, comprising 2.6% of its 13F portfolio. Coming in second is Fisher Asset Management, managed by Ken Fisher, which holds a $57.7 million position. Remaining members of the smart money that are bullish include Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Cliff Asness’ AQR Capital Management.
Due to the fact that First American Financial Corp (NYSE:FAF) has experienced flat sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds who sold off their entire stakes heading into Q4. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, valued at about $14.2 million in stock. Clint Carlson’s fund, Carlson Capital, also dropped its stock, about $8.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to First American Financial Corp (NYSE:FAF). These stocks are Jones Lang LaSalle Inc (NYSE:JLL), Graco Inc. (NYSE:GGG), AMC Networks Inc (NASDAQ:AMCX), and Booz Allen Hamilton Holding Corporation (NYSE:BAH). This group of stocks’ market values are similar to FAF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JLL | 24 | 798501 | -3 |
| GGG | 12 | 154364 | 1 |
| AMCX | 28 | 344024 | 4 |
| BAH | 23 | 290165 | -4 |
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $397 million. That figure was $430 million in FAF’s case. AMC Networks Inc (NASDAQ:AMCX) is the most popular stock in this table. On the other hand Graco Inc. (NYSE:GGG) is the least popular one with only 12 bullish hedge fund positions. First American Financial Corp (NYSE:FAF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AMCX might be a better candidate to consider a long position.
Disclosure: None
