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Hedge Funds Are Dumping Fidelity National Financial Inc (FNF)

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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Fidelity National Financial Inc (NYSE:FNF).

Fidelity National Financial Inc (NYSE:FNF) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. Fidelity National Financial Inc (NYSE:FNF) was in 34 hedge funds' portfolios at the end of June. The all time high for this statistic is 47. Our calculations also showed that FNF isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the 21st century investor’s toolkit there are many gauges stock traders use to grade stocks. Two of the best gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outpace the market by a significant margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let's take a look at the key hedge fund action regarding Fidelity National Financial Inc (NYSE:FNF).

Do Hedge Funds Think FNF Is A Good Stock To Buy Now?

At Q2's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. By comparison, 47 hedge funds held shares or bullish call options in FNF a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is FNF A Good Stock To Buy?
Is FNF A Good Stock To Buy?

More specifically, Windacre Partnership was the largest shareholder of Fidelity National Financial Inc (NYSE:FNF), with a stake worth $470.2 million reported as of the end of June. Trailing Windacre Partnership was Brave Warrior Capital, which amassed a stake valued at $273.2 million. AQR Capital Management, Parsifal Capital Management, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Windacre Partnership allocated the biggest weight to Fidelity National Financial Inc (NYSE:FNF), around 10.39% of its 13F portfolio. Brave Warrior Capital is also relatively very bullish on the stock, setting aside 9.38 percent of its 13F equity portfolio to FNF.

Because Fidelity National Financial Inc (NYSE:FNF) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who were dropping their full holdings heading into Q3. It's worth mentioning that Seth Klarman's Baupost Group dropped the largest investment of the "upper crust" of funds monitored by Insider Monkey, comprising about $123.5 million in stock. Jeffrey Altman's fund, Owl Creek Asset Management, also sold off its stock, about $66.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds heading into Q3.

Let's now review hedge fund activity in other stocks similar to Fidelity National Financial Inc (NYSE:FNF). We will take a look at Atmos Energy Corporation (NYSE:ATO), Guardant Health, Inc. (NASDAQ:GH), The Boston Beer Company Inc (NYSE:SAM), American Homes 4 Rent (NYSE:AMH), Allegion plc (NYSE:ALLE), Universal Health Services, Inc. (NYSE:UHS), and Sociedad Quimica y Minera (NYSE:SQM). 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 ATO,18,83813,3 GH,49,1708966,8 SAM,42,933501,13 AMH,31,757590,4 ALLE,37,1202742,10 UHS,41,724141,-2 SQM,19,156249,3 Average,33.9,795286,5.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $795 million. That figure was $1304 million in FNF's case. Guardant Health, Inc. (NASDAQ:GH) is the most popular stock in this table. On the other hand Atmos Energy Corporation (NYSE:ATO) is the least popular one with only 18 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. Our overall hedge fund sentiment score for FNF is 47.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on FNF as the stock returned 8.5% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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