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Were Hedge Funds Right About Fidelity National Financial Inc (FNF)?

Abigail Fisher
·6 min read

Is Fidelity National Financial Inc (NYSE:FNF) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Fidelity National Financial Inc (NYSE:FNF) investors should pay attention to an increase in hedge fund sentiment of late. Fidelity National Financial Inc (NYSE:FNF) was in 47 hedge funds' portfolios at the end of June. The all time high for this statistics is 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 43 hedge funds in our database with FNF positions at the end of the first quarter. Our calculations also showed that FNF isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Ken Griffin
Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let's take a look 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 second quarter's end, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FNF over the last 20 quarters. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in Fidelity National Financial Inc (NYSE:FNF) was held by Windacre Partnership, which reported holding $366.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $121.8 million position. Other investors bullish on the company included D E Shaw, AQR Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Windacre Partnership allocated the biggest weight to Fidelity National Financial Inc (NYSE:FNF), around 11.01% of its 13F portfolio. Parsifal Capital Management is also relatively very bullish on the stock, setting aside 6.71 percent of its 13F equity portfolio to FNF.

Consequently, key hedge funds have been driving this bullishness. Windacre Partnership, managed by Snehal Amin, assembled the most outsized position in Fidelity National Financial Inc (NYSE:FNF). Windacre Partnership had $366.6 million invested in the company at the end of the quarter. Farhad Nanji and Michael DeMichele's MFN Partners also initiated a $42.9 million position during the quarter. The other funds with new positions in the stock are David Zorub's Parsifal Capital Management, Ravi Chopra's Azora Capital, and Gilchrist Berg's Water Street Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Fidelity National Financial Inc (NYSE:FNF) but similarly valued. We will take a look at Huntington Bancshares Incorporated (NASDAQ:HBAN), Zynga Inc (NASDAQ:ZNGA), PulteGroup, Inc. (NYSE:PHM), Suzano S.A. (NYSE:SUZ), Vistra Corp. (NYSE:VST), MGM Growth Properties LLC (NYSE:MGP), and Kinross Gold Corporation (NYSE:KGC). This group of stocks' market values are closest to FNF's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HBAN,30,90448,1 ZNGA,52,1094586,-7 PHM,42,866135,6 SUZ,3,28866,0 VST,42,1561642,3 MGP,32,569697,4 KGC,30,806038,2 Average,33,716773,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $717 million. That figure was $1052 million in FNF's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 3 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 83.9. 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. 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 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 gained 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately FNF wasn't nearly as popular as these 10 stocks and hedge funds that were betting on FNF were disappointed as the stock returned 8.5% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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