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Hedge Funds Aren’t Done Buying Fidelity National Financial Inc (FNF)

Abigail Fisher

In this article you are going to find out whether hedge funds think Fidelity National Financial Inc (NYSE:FNF) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Fidelity National Financial Inc (NYSE:FNF) was in 43 hedge funds' portfolios at the end of March. FNF investors should be aware of an increase in hedge fund sentiment lately. There were 36 hedge funds in our database with FNF positions at the end of the previous quarter. Our calculations also showed that FNF isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (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 36% through May 18th. 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="399"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a look at the recent hedge fund action regarding Fidelity National Financial Inc (NYSE:FNF).

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

At the end of the first quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in FNF a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Fidelity National Financial Inc (NYSE:FNF) was held by AQR Capital Management, which reported holding $95.1 million worth of stock at the end of September. It was followed by D E Shaw with a $69.2 million position. Other investors bullish on the company included Citadel Investment Group, Two Sigma Advisors, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Mason Capital Management allocated the biggest weight to Fidelity National Financial Inc (NYSE:FNF), around 3.4% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, setting aside 2.2 percent of its 13F equity portfolio to FNF.

Consequently, key money managers were leading the bulls' herd. Lakewood Capital Management, managed by Anthony Bozza, assembled the most valuable position in Fidelity National Financial Inc (NYSE:FNF). Lakewood Capital Management had $11.8 million invested in the company at the end of the quarter. Kenneth Mario Garschina's Mason Capital Management also made a $10.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Joshua Nash's Ulysses Management, Paul Marshall and Ian Wace's Marshall Wace LLP, and Vikas Lunia's Lunia Capital.

Let's now review 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 Cabot Oil & Gas Corporation (NYSE:COG), Iron Mountain Incorporated (NYSE:IRM), NRG Energy Inc (NYSE:NRG), and Americold Realty Trust (NYSE:COLD). This group of stocks' market caps are closest to FNF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COG,37,469345,3 IRM,19,49061,2 NRG,38,859890,-4 COLD,25,275635,-1 Average,29.75,413483,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $413 million. That figure was $386 million in FNF's case. NRG Energy Inc (NYSE:NRG) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Fidelity National Financial Inc (NYSE:FNF) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on FNF as the stock returned 28.2% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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