Heartland Advisors, an investment management company, released its “Heartland Mid Cap Value Fund” third quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, the portfolio was 2.4% down compared to a 4.46% fall in the Russell Midcap Value Index. The performance was attributed to strong stock selection mainly in the Utilities and Industrials sectors. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Heartland Mid Cap Value Fund highlighted stocks like First American Financial Corporation (NYSE:FAF) in the third quarter 2023 investor letter. Headquartered in Santa Ana, California, First American Financial Corporation (NYSE:FAF) provides financial services. On October 12, 2023, First American Financial Corporation (NYSE:FAF) stock closed at $52.88 per share. One-month return of First American Financial Corporation (NYSE:FAF) was -12.07%, and its shares gained 16.22% of their value over the last 52 weeks. First American Financial Corporation (NYSE:FAF) has a market capitalization of $5.451 billion.
Heartland Mid Cap Value Fund made the following comment about First American Financial Corporation (NYSE:FAF) in its Q3 2023 investor letter:
“Financials. First American Financial Corporation (NYSE:FAF), the second-largest title insurance provider in the U.S., is a quintessential value bucket example (buying a high-quality operator at an attractive valuation when their business is in a recession).
While most people don’t think about title insurance when purchasing a home, policies indemnify homeowners and lenders against title defects that could result in significant losses arising from back taxes, liens, and other claims. Rising mortgage rates over the past two years have weighed on First American shares, as 30-year fixed rate residential mortgages more than doubled from around 3% at the end of 2021 to more than 7% today. Residential refinance volumes plunged 85% by late 2022, while new purchase volumes fell more than 40%. As a result, FAF’s earnings expectations are down nearly 50% relative to the cycle peak.
However, the year-over-year decline in the Mortgage Bankers Association Purchase Index is getting “less bad,” which is often when the share prices of good companies begin to recover (as long as the market considers the improvement to be sustainable). Meanwhile, management has taken several self-help steps to improve profitability. Examples include exiting unprofitable property and casualty operations and automating manual processes, which should boost margins.
FAF shares trade at just 12X earnings, based on forecasts for the next 12 months. While a P/E ratio of 12X is in line with the insurance industry, we do not believe the broader industry has the same cyclical earnings upside as First American. Historically, title insurers have traded at 15X or higher early in a cyclical recovery.”
A close-up image of an insurance policy with hands standing firmly on top, conveying security. Editorial photo for a financial news article. 8k. –ar 16:9
First American Financial Corporation (NYSE:FAF) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held First American Financial Corporation (NYSE:FAF) at the end of the second quarter, which was 25 in the previous quarter.
We discussed First American Financial Corporation (NYSE:FAF) in another article and shared Moon Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
