Investors' Concerns Affected First American Financial Corporation (FAF) in Q2

Ariel Investments, an investment management company, released its “Ariel Small Cap Value Strategy” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter witnessed extreme volatility. Stocks declined sharply after the “Liberation Day” tariff announcement and staged a remarkable recovery as the administration initiated a 90-day pause. In the quarter, Ariel Small Cap Value Tax-Exempt Composite appreciated +7.72% gross of fees (+7.58% net of fees) against this backdrop, compared to +4.97% and +8.50% returns of the Russell 2000 Value Index and the Russell 2000 Index, respectively. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its second-quarter 2025 investor letter, the Ariel Small Cap Value Strategy highlighted stocks such as First American Financial Corporation (NYSE:FAF). First American Financial Corporation (NYSE:FAF) is a financial services company. The one-month return of First American Financial Corporation (NYSE:FAF) was 8.47%, and its shares gained 3.84% of their value over the last 52 weeks. On August 21, 2025, First American Financial Corporation (NYSE:FAF) stock closed at $64.66 per share, with a market capitalization of $6.582 billion.

Ariel Small Cap Value Strategy stated the following regarding First American Financial Corporation (NYSE:FAF) in its second quarter 2025 investor letter:

"Title insurer, First American Financial Corporation (NYSE:FAF) also traded lower in the quarter as investors remain concerned that elevated interest rates and a weakening consumer environment will keep housing activity muted. Additionally, uncertainty remains over whether regulation to improve housing affordability will negatively impact demand for title insurance. Despite the noise and continued economic uncertainty, FAF delivered a top-and bottom-line earnings beat with broad-based revenue strength continuing to underscore steady margin improvement. While this year’s financial performance is off to a better start than management anticipated, FAF expects earnings to grow from current levels and believes the mortgage origination market is in the early stages of recovery. In our view, investors continue to underappreciate FAF's scale, operating leverage and investment portfolio."

First American Financial Corporation (NYSE:FAF) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held First American Financial Corporation (NYSE:FAF) at the end of the second quarter, which was 41 in the previous quarter. While we acknowledge the potential of First American Financial Corporation (NYSE:FAF) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered First American Financial Corporation (NYSE:FAF) and shared Ariel Small Cap Value Strategy's views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.