We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 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 healthy stock for your portfolio? Money managers are in a bearish mood. The number of long hedge fund bets shrunk 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 below 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. Video: Click the image to 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 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_258236" align="aligncenter" width="450"] Ken Griffin of Citadel Investment Group[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the new hedge fund action regarding Fidelity National Financial Inc (NYSE:FNF).
What does smart money think about 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 held long positions in 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 the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Nitorum Capital held the most valuable stake in Fidelity National Financial Inc (NYSE:FNF), which was worth $69 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $65.1 million worth of shares. Citadel Investment Group, D E Shaw, 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 Nitorum Capital allocated the biggest weight to Fidelity National Financial Inc (NYSE:FNF), around 4.01% of its portfolio. One Fin Capital Management is also relatively very bullish on the stock, earmarking 2.84 percent of its 13F equity portfolio to FNF.
Judging by the fact that Fidelity National Financial Inc (NYSE:FNF) has witnessed falling interest from hedge fund managers, we can see that there lies a certain "tier" of money managers that slashed their positions entirely in the third quarter. Intriguingly, Usman Waheed's Strycker View Capital cut the biggest investment of the 750 funds followed by Insider Monkey, valued at close to $12.7 million in stock. Vikas Lunia's fund, Lunia Capital, also dumped its stock, about $5.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Fidelity National Financial Inc (NYSE:FNF). We will take a look at Equity Lifestyle Properties, Inc. (NYSE:ELS), Vornado Realty Trust (NYSE:VNO), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Lincoln National Corporation (NYSE:LNC). All of these 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 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on FNF, though not to the same extent, as the stock returned 8% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.