First American Corp (FAF)

insurer

Stock price has suffered unduly with the subprime crisis
Company has been around over 100 yrs, and will likely be around 100 more

if you can get it @33.12

good stock see lfg about my positive thoughts regarding title companies

Undervalued due to negative sentiment covering anything housing related, this frim has a solid info. services and title insurance business model which will survive the current downturn and trade in the $40-50 range in 3 -4 years time.

There is going to be near term pressure on the stock price caused by the overall slowdown in the housing market. I don’t see any positive catalysts in the short term. So why Buy? The long term story is what FAF has going for them. Here is why I am buying:

Management has the discipline necessary to cut expenses. FAF has moved many of its processes off shore in order to increase its margins. In response to the continuing housing slump, FAF has announced that they are laying off 1,300 employees in the 3rd quarter, and are eliminating many of the executive perks. This is in addition to the 600 they laid off in the 2nd quarter.

FAF has invested in technology that automates a lot of their processes which provides a better product at a cheaper price. Because the number of real estate transaction has declined, the title insurance segment is becoming much more competitive. As the larger title insurance companies improve their efficiencies, the insurance rates will go down. As rates drop, the smaller title companies will not be able to compete, resulting in either the smaller companies going out of business, or partnering with the larger companies. Either way, FAF will increase its already impressive market share.

FAF is expanding internationally. Imagine how many title insurance and escrow transactions will happen in China alone! As an added bonus, a weak dollar helps the bottom line.

While the lion share of FAF’s revenue comes from title insurance, FAF has increased its non-title-insurance related businesses. These other segments are going to continue to grow as a percentage of the bottom line making FAF’s stock price less correlated to real estate cycles. A more stable stock price is attractive to many institutional investors.

When the larger title companies file new rates, don’t be surprised by a significant short term drop in the stock price of all of the title insurers. This will be a buying opportunity. The lower rates will scare less knowledgeable investors, so watch for it, and buy on the dips.

The First American Corporation exceeded analysts' earnings expectations in 13 out of the past 16 quarters by an average margin of 15.3%. Consensus estimates for both this quarter and the full year have risen over the
past 30 days. The Board of Directors recently raised its cash dividend by 22% to 22 cents per share. FAF has a price-to-book ratio of 1.6, compared to 4.2 for the market.

First American has a huge market share in the title insurance business. They are also quickly diversifying into business/loan intelligence. This should make their income less dependent on the housing market. Should be a good long-term bet.

The First American Corporation, a Fortune 500 company that traces its history to 1889, is America’s largest provider of business information. First American combines advanced analytics with its vast data resources to supply businesses and consumers with valuable information products to support the major economic events of peoples’ lives, such as getting a job, renting an apartment, buying a car or house, securing a mortgage and opening or buying a business. The company operates in five primary business segments, to include Title Insurance and Services, Specialty Insurance, Mortgage Information, Property Information, and Risk Mitigation and Business Solutions

The company is very bullish on its title business where it is the market leader with 28% market share. Endorsing the same it has installed TitleSmart, which delivers insured title commitments in less than 60 seconds along with a robust technology platform called Fast Transaction System. However, the performance of the unit is greatly tied to the real estate and competes on volumes rather than margins. Though 72% of the revenues come from title insurance it contributes only half of the net earnings, to mean its earning mix is balanced across all business segments.

Data business is an area of concern where scalability in volumes is possible with ease and has strong barriers to entry. Fundamental analytics is of importance as it provides meaning to the data for which it has acquired UK Valuation, which specializes in automated valuation model. Mortgage services ranging from origination to quality control seems to have growth prospects due to the positive outlook of the favorable interest rate movements

The company has been much disciplined in cutting expenses and reduced headcount by an additional 600 people in the recent quarter. Moreover it has started shifting of functions offshore for cost effectiveness. In line with this it has opened its third operations office in Mangalore, India. Majority of the business conducted have a huge chunk of fixed expenses already incurred and would benefit when the revenues rise in the next year.

good management and continues to diversify.

Good Value Play overreaction from market pressed it down.

Innovative products, will shine

I look at the wisdom said by others to bet on this one. Competitive markets are close by and looks like a long shot to me. Will try it

With a PE less than 9, significant insider ownership, a relatively unknown business that is a quasi monopoly (title insurance, only competitor Fidelity Title Insurance) this company has a huge moat and is underpriced. Everyone has to have title insurance afterall to buy or sell a house. Weakness in the housing market has hurt earning less than what was expected. Houses will always be bought and sold. I'll happily take this company, its almost 2% a year dividend and completely free DRIP program to the bank.

I am hoping the real estate slowdown doesn't spook investors away from this stock. FAF has a wide moat and I believe Mr. Durrel's value analysis.

Great valuation and all the bad news of the housing market and more is already built into the price.

Priced to succeed, by DCF this company is underpriced even if it never grows. It may be hurt a bit more in short term, but it'll be back, and it's also consolidating a solid competitive advantage with its database.

FAF might see short-term volatility in tandem with the real estate market, and a larger-than-expected housing market downturn could negatively impact FAF in the mid-term. Its information database and other services should mitigate this somewhat. Free cash flow remains robust. Ancillary services (such as servicing for foreclosures) would also offset weaker results from a hard housing landing.

a solid company that is undervalued. I am looking for it to be a long term part of my portfolio.