Ticker: FAF, Buy below $70.
First American Financial Corporation provides comprehensive title insurance protection and professional settlement services for homebuyers and sellers.
Why I Would Buy
- Dividend – ~3% yield, <30% payout ratio.
- Low Debt –Debt to equity 0.4.
- Cheap – Forward P/E <10x, trailing < 9x.
- Return on Equity – In the teens for most of past decade.
- Oligopoly – Massive database of title records, competitive advantage.
What Could Go Wrong
- Regulatory Risk – Could face change on state regulations, some states even insure titles themselves.
- Short-Term Earnings Spike – Temporary boost from refinancing and new home buying resulting from low interest rates. Earning likely to decline/normalize.
Disclosure: I am long FAF, please read additional disclosures here before taking any action based on this post.