1. Fidelity National Financial Inc (NYSE:FNF)
Stake Value of Water Street Capital: $18,897,000
Percentage of Water Street Capital’s 13F Portfolio: 1.99%
Number of Hedge Fund Holders: 32
Dividend Yield as of December 5: 3.46%
Fidelity National Financial, Inc (NYSE:FNF) provides various insurance products in the United States. The company operates through the following segments: Title, F&G, and Corporate and Other. On November 2nd, Fidelity National Financial, Inc (NYSE:FNF) raised its quarterly dividend by 10% to 44 cents from 40 cents per share. The dividend will be payable by December 31st to stockholders of record as of December 17th. Fidelity National Financial, Inc (NYSE:FNF) is based in Jacksonville, Florida.
This September, Fidelity National Financial, Inc (NYSE:FNF) reported its third-quarter earnings for 2021. The company beat revenue estimates by $705.11 million and generated revenues of $3.89 billion for the quarter, up 30.78% year over year from $2.98 billion. Fidelity National Financial, Inc (NYSE:FNF) also beat EPS by $0.48 for the quarter and reported earnings per share of $2.12.
We, at Insider Monkey, monitor and track data for 867 elite hedge funds as of the third quarter of 2021. Of these 867 funds, 32 held stakes in Fidelity National Financial, Inc (NYSE:FNF) which amounted to over $1.39 billion, up from $1.30 billion and 34 positions in the second quarter of 2021.
Here’s what Merion Road Capital Management had to say about Fidelity National Financial, Inc (NYSE:FNF) in their first quarter 2021 investor letter:
“During the period I added to our position in Fidelity National Financial (“FNF”). FNF is the nation’s largest title insurer with 33% market share. It was built over the last 30 years by Bill Foley, who revolutionized the industry with his emphasis on eliminating bureaucracy, utilizing technology to streamline operations, and maximizing customer service. He is well-regarded as a savvy investor and consummate deal-maker having acquired and divested multiple entities both in title and ancillary fields. He continues to serve as the chairman of FNF with a personal stake in the company worth hundreds of millions.
While title insurance is technically insurance, it is a bit of a unique animal. Being that the insurer writes a policy based on past events, not unknowns in the future, losses are relatively small and predictable. The more data an insurer can analyze, the less likely they are to experience a claim; and the more efficiently they can analyze the data and process the application, the lower their costs will be. FNF has invested in automating its work stream through their ownership of NextAce (automated search), SoftPro (document production and closing), and multiple other cloud-based platforms. Due to these investments, FNF boasts industry leading margins and is able to attract more third party agents who can leverage their service offering.
Last year FNF acquired the outstanding interest in FGL Holdings (“F&G”), a fixed indexed and fixed rate annuity provider. Though this appears to be a financial rather than strategic acquisition, there should be some opportunities to grow the combined business. Notably, the acquisition afforded F&G an improved credit profile which has led to ratings upgrades. These upgrades allow F&G to address new distribution lines, such as in the bank market where FNF has strong relationships through their title and escrow business. The company announced that since launching in July 1st it had already achieved $500mm of sales in this channel (vs. full year sales of ~$4bn).
FNF is likely over-earning right now based on the recent spike in mortgage activity. Looking out to 2022 I estimate that earnings should step down to something a little shy of $5.00/sh. At current prices we are collecting a double digit earnings yield for a business with strong market positioning and a superb capital allocator. Last year they repurchased a bunch of stock in Q1 at depressed prices and have announced their intent to acquire another $500mm over the next 12 months.”
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