Under $12.30, FAF is a table pounding BUY. 2012 earnings will probably be anywhere from $1.20-$1.60, so with $3.30 net cash/share, the business will be selling for 6-7.5 PE. Book value will be above $20, with cash flow about $1.50-$2.00/share. I'm expecting stock buybacks and dividend increases in 2012. The time to buy will be now till the end of the year as tax-loss sellers and the impatient dump shares.
Are there anymore catalysts for the downside or upside?
MBA is forecasting a $1.2 trillion market for 2011, compared to an under $1.0 trillion market for 2010. Take this with a grain of salt though.
FAF currently trades at 0.61X book value per share. Historically, going back as far as I could from 1996 to present, FAF traded at an average multiple of 1.15X book value per share with the 3 highest BV ratios in 1998 (2.48X), 1997 (1.55X), 2000 (1.47X) [surprisingly, during the real estate boom from 2003-2006, the BV multiple averaged 1.20X] and the 3 lowest, well, you can guess.
FAF, in my opinion, is no longer a growth name, but more of a value play. It's cheap here, but there are still a lot of headwinds not just for the company but for the industry and economy in general. Rising interest rates can put a hamper on purchases, which is roughly 2X more revenue/profit than a refinance transaction. In my opinion, the tell is unemployment. The lower, the better.
Anyway, just wanted to post here to show that you aren't alone.
Situation at FAF is finally clear, with finalized BAC settlement and no intentions of buying CLGX or any of their business units. Now, mgt can concentrate on the title insurance business under an improving climate.
Barclays upgraded several home builders on 12/5 and TOL reported better than expected earnings on 12/6. As banks put more and more foreclosers on the market, new owners either for themselves or as landlords will be additional volume for the title insurance industry. FAF doesn't care about price (although higher prices are better than lower), what is important are the volumes or transactions-which will increase in 2012 vs 2011.