Insider Trading Report: First American Financial (FAF)

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  • Mark Oman, a director at specialty insurance company First American Financial (FAF), recently bought 4,000 shares. The buy increased his holdings by nearly 12 percent and came to a total cost of just over $191,000.

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  • The purchase marks the first buy from company insiders in years. Insiders have typically been sellers over the past three years, mostly by C-suite executives and not directors.

    Shares of the company have slid 22 percent in the past year, in spite of a 14.5 percent rise in company revenue.

    Besides faring operationally well, the company trades at less than 14 times forward earnings, trades just above book value, and just below its price to sales ratio. All are signs of a reasonable valuation. The company has also increased its annual dividend payout by two cents, for a current yield near 3.6 percent.

    Action to take: This is a smaller company likely to be bought out by a bigger insurance player at some point, and at current valuations makes sense for long-term investors.

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  • Shares just dropped after a slight earnings miss, and are likely to rebound from the drop in the coming weeks. The April 2021 $50 calls, with a bid/ask spread near $2.90, look like an inexpensive way to grab mid-double-digit returns from such a rebound.