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Hedge Fund Consensus Stocks vs. Fidelity National Financial Inc (FNF) In 2019

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Fidelity National Financial Inc (NYSE:FNF).

Is Fidelity National Financial Inc (NYSE:FNF) a buy right now? Prominent investors are becoming less confident. The number of bullish hedge fund bets fell by 1 lately. Our calculations also showed that FNF isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). FNF was in 28 hedge funds' portfolios at the end of September. There were 29 hedge funds in our database with FNF holdings at the end of the previous quarter.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT
AQR CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to take a look at the fresh hedge fund action regarding Fidelity National Financial Inc (NYSE:FNF).

What have hedge funds been doing with Fidelity National Financial Inc (NYSE:FNF)?

Heading into the fourth quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FNF over the last 17 quarters. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

The largest stake in Fidelity National Financial Inc (NYSE:FNF) was held by Nitorum Capital, which reported holding $69 million worth of stock at the end of September. It was followed by AQR Capital Management with a $65.1 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position Nitorum Capital allocated the biggest weight to Fidelity National Financial Inc (NYSE:FNF), around 4.01% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, earmarking 2.84 percent of its 13F equity portfolio to FNF.

Due to the fact that Fidelity National Financial Inc (NYSE:FNF) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of fund managers that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Usman Waheed's Strycker View Capital dumped the biggest position of the "upper crust" of funds followed by Insider Monkey, totaling about $12.7 million in stock, and Vikas Lunia's Lunia Capital was right behind this move, as the fund dropped about $5.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.

Let's now take a look at 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 Equity Lifestyle Properties, Inc. (NYSE:ELS), Vornado Realty Trust (NYSE:VNO), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Lincoln National Corporation (NYSE:LNC). This group of stocks' market caps are similar to FNF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELS,19,521910,1 VNO,32,724917,5 BMRN,45,1621801,0 LNC,34,1142033,-1 Average,32.5,1002665,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1003 million. That figure was $341 million in FNF's case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Equity Lifestyle Properties, Inc. (NYSE:ELS) is the least popular one with only 19 bullish hedge fund positions. Fidelity National Financial Inc (NYSE:FNF) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on FNF as the stock returned 48.9% in 2019 through December 23rd and outperformed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

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

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