My selections are a play on the title insurance industry which I believe is one of the most undervalued groups in what is an overvalued market. Traditionally, the market has valued these companies at between 2 and 3 times book value but it has been awile since we've seen such valuations. The companies are good at what they do and very few claims are filed/paid. Reserves continue to increase and because of the refi craze many policies previously written have been replaced by new ones. The 5 biggest companies (FNF, FAF, LFG, STC, and ORI) continue to increase their combined market share as they acquire the mid-sized and smaller firms. ALL compnaies in the industry, because of low valuations, are acquisition candidates.
Fidelity National Financial (FNF) X 2: "Cadillac" of the industry. Management has an incredible record in regards to successful acquisitions. Have diversified into information services, flood insurance, etc. Cash and the reserve portfolio total around $3.5 billion with interest and dividend income going right to the bottom line. 100% dividend increase last year.
First American Financial (FAF) X 2: #2 in the market. Huge cash hoard. Through their majority owned publicly traded subsidiary FADV have diversified into employee screening and related businesses such as USSearch.
Capital Title Group (CTGI): One of the few smaller publicly traded companies. Believe that it will be bought out for between $6-8 per share. Would be a good fit for FAF but could see LFG buying it as well.
Real businesses with real profits and cash flows trading at ridiculously low valuations in relation to the overall market.
A nice industry for the long term imo, and a personal favorite (though not the particular companies you mention).
But a large component of the profitability and growth is due to refi. Refi is due in turn to declining interest (i.e., mortgage) rates. The downward trend in rates has held for more than 20 years. But some doubt that it will continue, or even that it can continue without leading to deflation .
So here's a key scenario: how much will title insurance companies earn if we face a 20-year period of *rising* rates?