Thursday, October 29, 2009

Bookkeeping: Closing Out First American (FAF) Post Earnings

First American (FAF), a title insurance firm (predominantly) reported earnings today and while they are very good on the quarter they are guiding for some softness go forward.  This is not a surprise since the threat of the end of Cash for Cul-de-Sacs plus seasonality (more homes sell in spring, summer than fall, winter) kick in.  I am not sure what the American people are thinking when they believed that there would not be more free handouts after the Nov 30th deadline - they could of read FMMF blog 6 months ago and known more free money from the heavens would be handed out.

Speaking of which... Let me add, just as I did after the first Cash for Cul-de-Sacs came out early this year, that as we now see version 2.0 rolling off the presses (which will run through next April)... that the Realtors Association will lobby for Cash for Cul-de-Sac 3.0 right around /February March 2010, saying that the housing market cannot run on its own and what loyal American politican would want to kill the economy by taking away realtors commissions buyers incentives?  So we'll certainly need version 3.0.  The politicians will say "yes sir thank you sir - please deposit your political contributions at the normal time and place", and we'll have yet another extension.  Boo yah fellow Americans.


Back to FAF - the chart is beginning to weaken, so we're going to exit this name which was a backdoor play on "housing recovery" and remind ourselves to load up on every form of housing related stock next March so we can cheer the labeling of green shoots that bulls will read into "improving" housing metrics that come in May - August 2010.  The same strong period every year...

As for the stock, we were stopped out this AM at $30.50 on the majority of the position , and the rest is heading to the exit over $31.  Despite owning this stock during 3 separate earnings reports it smashed analysts estimates,  [Jul 30, 2009: First American Profit Triples] [Apr 30, 2009: First American Beats by a Mile] we have not really prospered other than 1 big run.  Hence, we made a small amount over time but nothing that moved the needle.  Obviously we would of been better served to pile into AIG (AIG) since fundamentals mean little and "price action" is the thing.

We'll circle back at the end of winter as we position ourselves for the "shocking" news that May 2010 home sales are greater than April 2010, and that June 2010 will improve over May 2010 and so on and so forth.  Remember, act "surprised" and buy stocks. Kool Aid!

If you care, some color on FAF's earnings here.

No position

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