What One Hedge Fund's $29.6 Million Bet on First American Signals About the U.S. Housing Market
Key Points
Boston-based Solel Partners bought 460,700 shares of First American Financial in the third quarter for an estimated $29.6 million.
The position accounts for 5.7% of reportable assets under management at quarter-end.
First American Financial is a new holding for the fund and is not among its top five positions.
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On Friday, Boston-based Solel Partners disclosed a new position in First American Financial (NYSE:FAF), acquiring 460,700 shares in a transaction estimated at $29.6 million.
What Happened
Solel Partners LP initiated a new stake in First American Financial (NYSE:FAF), acquiring 460,700 shares during the third quarter. The position, valued at $29.6 million as of September 30, represents 5.7% of the fund’s reportable U.S. equity holdings. The transaction was disclosed in a filing with the Securities and Exchange Commission released Friday.
What Else to Know
Top holdings after the filing:
- NYSE: UNH: $71.3 million (13.7% of AUM)
- NYSE: BRSL: $59 million (11.4% of AUM)
- NYSE: CVS: $53.8 million (10.4% of AUM)
- NYSE: SYF: $52.5 million (10.1% of AUM)
- NYSE: TNL: $46.8 million (9.0% of AUM)
As of Friday, shares of First American Financial were priced at $63.72, up 1.7% over the past year and underperforming the S&P 500's nearly 15% gain in the same period.
Company Overview
| Metric | Value |
|---|---|
| Revenue (TTM) | $7.1 billion |
| Net Income (TTM) | $482.3 million |
| Dividend Yield | 3.4% |
| Price (as of market close Friday) | $63.72 |
Company Snapshot
First American Financial is a leading provider of title insurance and specialty financial services, operating at scale with over $7 billion in trailing 12-month revenue. The company leverages its extensive network and data assets to deliver risk management solutions across the real estate transaction lifecycle. Its diversified offerings and established market presence support resilient earnings and a stable dividend profile. It serves real estate professionals, mortgage lenders, homeowners, and institutional investors in the United States and select international markets.
Foolish Take
For long-term investors, Solel Partners’ new position in First American Financial stands out because of the timing. Moving nearly 6% of its U.S. equity book into a title insurer—a sector known for rate sensitivity and transaction-driven volatility—suggests Solel sees the early stages of a recovery in real estate activity rather than a late-cycle risk.
The move comes as First American posted a "strong performance" in the third quarter "despite continued challenges in the U.S. housing market," CEO Mark Seaton said in a statement. Third-quarter revenue surged 41% year over year to $2 billion as commercial revenue jumped 29% and investment income climbed to $153 million, up 12%. Shares, meanwhile, have been volatile this year and remain largely flat over 12 months, lagging broader markets despite improving fundamentals. First American also boosted its dividend and continues to repurchase stock, signaling confidence in cash generation.
If real estate activity rebounds, First American’s leverage to rising volumes—and its push into data, technology, and AI—could translate into stronger earnings power. But given the sector’s sensitivity to rates, investors should expect continued volatility along the way.
Glossary
Stake: The ownership interest or investment a fund or individual holds in a company.
Assets Under Management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.
Reportable Assets: Investments that a fund is required to disclose in regulatory filings, typically U.S. publicly traded securities.
Dividend Yield: Annual dividend payments divided by the stock's price, shown as a percentage.
Trailing Twelve Months (TTM): The 12-month period ending with the most recent quarterly report.
Title Insurance: Insurance that protects property buyers and lenders from financial loss due to title defects or disputes.
Escrow: A financial arrangement where a third party holds funds or assets until specific conditions are met.
Underwriting: The process of evaluating and assuming risk, often for insurance policies or securities issuance.
Risk Mitigation: Strategies or services designed to reduce potential financial losses or uncertainties.
Specialty Insurance: Insurance products that cover unique or non-standard risks not addressed by typical policies.
Institutional Investors: Organizations such as pension funds, mutual funds, or insurance companies that invest large sums of money.
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Synchrony Financial is an advertising partner of Motley Fool Money. Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health and UnitedHealth Group. The Motley Fool has a disclosure policy.
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