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Did Hedge Funds Drop The Ball On Fidelity National Financial Inc (FNF)?

Reymerlyn Martin

World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Fidelity National Financial Inc (NYSE:FNF) has experienced a decrease in support from the world's most elite money managers of late. Our calculations also showed that FNF isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

D. E. Shaw

Let's take a glance at the key hedge fund action surrounding Fidelity National Financial Inc (NYSE:FNF).

How are hedge funds trading Fidelity National Financial Inc (NYSE:FNF)?

At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FNF over the last 14 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

FNF_mar2019

When looking at the institutional investors followed by Insider Monkey, Cliff Asness's AQR Capital Management has the biggest position in Fidelity National Financial Inc (NYSE:FNF), worth close to $137.1 million, accounting for 0.2% of its total 13F portfolio. The second most bullish fund manager is Paul Marshall and Ian Wace of Marshall Wace LLP, with a $74.5 million position; 0.8% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions encompass D. E. Shaw's D E Shaw, Jim Simons's Renaissance Technologies and Martin Whitman's Third Avenue Management.

Because Fidelity National Financial Inc (NYSE:FNF) has witnessed declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few hedge funds that slashed their entire stakes last quarter. At the top of the heap, Matthew Hulsizer's PEAK6 Capital Management dropped the largest position of all the hedgies monitored by Insider Monkey, valued at close to $1.1 million in stock. Michael Platt and William Reeves's fund, BlueCrest Capital Mgmt., also sold off its stock, about $0.5 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Fidelity National Financial Inc (NYSE:FNF) but similarly valued. These stocks are Cenovus Energy Inc (NYSE:CVE), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Herbalife Nutrition Ltd. (NYSE:HLF), and Centrais Elétricas Brasileiras S.A. - Eletrobras (NYSE:EBR). This group of stocks' market values are similar to FNF's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVE,20,389711,7 MLCO,21,318428,-6 HLF,29,4017098,-9 EBR,5,10002,1 Average,18.75,1183810,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $1184 million. That figure was $380 million in FNF's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. - Eletrobras (NYSE:EBR) is the least popular one with only 5 bullish hedge fund positions. Fidelity National Financial Inc (NYSE:FNF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on FNF as the stock returned 22.6% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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

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