In this article, we discuss the 5 best undervalued dividend stocks to buy now. If you want to read our detailed analysis of dividend investing, go directly to the 10 Best Undervalued Dividend Stocks to Buy Now.
5. Fidelity National Financial, Inc. (NYSE: FNF)
Number of Hedge Fund Holders: 40
PE Ratio: 6.4
Fidelity National Financial, Inc. (NYSE: FNF) is a Florida-based company that provides insurance and settlement services to the real estate industry. It is placed fifth on our list of 10 best undervalued dividend stocks to buy now and was founded in 1847. Fidelity stock has returned more than 72% to investors in the past year. In addition to insurance products, the firm also offers technology and transaction services to the real estate and mortgage security sectors of the United States economy.
In quarterly earnings for the first three months of 2021, posted earlier this month, Fidelity National Financial, Inc. (NYSE: FNF) reported a revenue of over $3 billion and earnings per share of $1.56. The revenue figure beat market estimates by $280 million.
Out of the hedge funds being tracked by Insider Monkey, Houston-based investment firm Windacre Partnership is a leading shareholder in Fidelity National Financial, Inc. (NYSE: FNF) with 11 million shares worth more than $455 million.
In its Q1 2021 investor letter, Merion Road Capital Management, an asset management firm, highlighted a few stocks and Fidelity National Financial, Inc. (NYSE: FNF) was one of them. Here is what the fund said:
“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.”
4. Apollo Global Management, Inc. (NYSE: APO)
Number of Hedge Fund Holders: 30
PE Ratio: 7.3
Apollo Global Management, Inc. (NYSE: APO) is a New York-based alternative investment firm founded in 1990. It is ranked fourth on our list of 10 best undervalued dividend stocks to buy now. Apollo stock has returned more than 25% to investors over the past year. The company operates in North America, Asia, and Europe. The firm primarily manages client-focused portfolios for endowment and sovereign wealth funds, as well as other institutional and individual investors.
On May 20, Apollo Global Management, Inc. (NYSE: APO) announced that Josh Harris, a co-founder at the firm, would be stepping down from his operational role at the firm by the end of this year to focus on building his own asset class investment business.
At the end of the fourth quarter of 2020, 30 hedge funds in the database of Insider Monkey held stakes worth $2 billion in Apollo Global Management, Inc. (NYSE: APO), up from 28 in the preceding quarter worth $1.8 billion.
In its Q3 2020 investor letter, RiverPark Advisors, LLC, an asset management firm, highlighted a few stocks and Apollo Global Management, Inc. (NYSE: APO) was one of them. Here is what the fund said:
“Blackstone & Apollo: Our alternative asset managers BX and APO were top detractors for the quarter as their results were affected by the COVID shutdowns, which have delayed the selling of assets and the realization of performance fees. Both companies (as well as our third alternative asset manager KKR) continue to generate consistently strong fee-related earnings (BX’s and APO’s fee-related earnings increased 28% and 9%, respectively, in the second quarter) and grow their assets under management (AUM) at impressive rates (BX’s and APO’s fee-generating AUM increased 12% and 45%, respectively, year over year).
While both face a temporary slowdown in investment realizations and near-term mark-to-market headwinds from the current crisis, most of their capital is long-dated or even permanent, most of their fees, which are high-margin and recurring, are not sensitive to the market, and both have billions of dollars of capital available to invest ($156 billion and $47 billion at the end of 2Q for Blackstone and Apollo, respectively). We continue to view BX and APO as two of the better risk-reward holdings in our portfolio, offering substantially better-than-average growth and cash flow fundamentals, and world class management teams, as well as dividend yields of 2.8% and 4.2%, respectively.”
3. Quest Diagnostics Incorporated (NYSE: DGX)
Number of Hedge Fund Holders: 45
PE Ratio: 9.9
Quest Diagnostics Incorporated (NYSE: DGX) is a New Jersey-based biotechnology firm founded in 1967. It is ranked third on our list of 10 best undervalued dividend stocks to buy now. The firm provides diagnostic and testing services mainly in the United States. Some of the brands it owns include Quest Diagnostics, AmeriPath, Dermpath Diagnostics, ExamOne, and Quanum, among others. It also operates a clinical laboratory and offers risk assessment services to the insurance industry.
Quest Diagnostics Incorporated (NYSE: DGX) posted earnings for the first three months of 2021 in April, reporting a revenue of $2.7 billion and earnings per share of $3.76. The revenue for the first quarter of 2021 was up close to 50% compared to the same period in the previous year.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm AQR Capital Management is a leading shareholder in Quest Diagnostics Incorporated (NYSE: DGX) with 512,701 shares worth more than $65 million.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Quest Diagnostics Incorporated (NYSE: DGX) was one of them. Here is what the fund said:
“Within healthcare, our largest position is Quest Diagnostics, a leader in independent lab testing and diagnostics. Quest offers its lab services at a fraction of the cost of hospital labs, which constitutes a strong cost-savings value proposition to new and existing customers. It is not surprising that by virtue of the value Quest creates, the company is increasingly serving as an outsource partner to hospitals and healthcare networks across the U.S. We believe Quest’s market is very sticky and only getting larger. The cost savings accruing to Quest’s customers should bode well for the long-term success of the business.”
2. The Allstate Corporation (NYSE: ALL)
Number of Hedge Fund Holders: 38
PE Ratio: 11.9
The Allstate Corporation (NYSE: ALL) is an Illinois-based insurance firm founded in 1931. It is ranked second on our list of 10 best undervalued dividend stocks to buy now. Allstate stock has returned more than 44% to investors over the past year. The firm offers property and casualty insurance products mainly in the United States and Canada. Some of the brands it owns include Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside Services, Arity, and Allstate Identity Protection, among others.
On May 5, The Allstate Corporation (NYSE: ALL) posted a revenue of $12.4 billion for the first quarter of 2021, up more than 34% compared to the same period last year and beating market predictions by $2.24 billion.
At the end of the fourth quarter of 2020, 38 hedge funds in the database of Insider Monkey held stakes worth $828 million in The Allstate Corporation (NYSE: ALL), the same as in the preceding quarter worth $1.2 billion.
In its Q2 2020 investor letter, Generation PMCA, an asset management firm, highlighted a few stocks and The Allstate Corporation (NYSE: ALL) was one of them. Here is what the fund said:
“Allstate, the second largest personal auto and home insurance writer in the U.S., should see earnings expand this year, during a challenging period when most companies aren’t expected to deliver year-over-year earnings growth. Higher mortality rates from coronavirus are being offset by lower mortality outside of virus-related deaths and expense control. In auto, the benefits of lower miles driven due to the pandemic offset auto rebates. Historically, Allstate’s scale and conservative underwriting have translated to superior profitability metrics. The company is on pace to achieve a mid-teen return on equity for ’21, well above peers. However, with shares currently at 1.3x book value, Allstate trades at a discount to competitors. We believe skepticism around recent acquisitions to diversify away from life and auto insurance (e.g., identify theft and warranties) is the reason for its discounted valuation. We expect the company to continue to cast its net further afield given the long-term threat of autonomous vehicles to its automobile franchise. We are comfortable with the strategy, especially since these acquisitions are immaterial. Meanwhile, the company should continue to post peer-beating results. Our FMV estimate is $120.”
1. The Goldman Sachs Group, Inc. (NYSE: GS)
Number of Hedge Fund Holders: 76
PE Ratio: 8.9
The Goldman Sachs Group, Inc. (NYSE: GS) is a New York-based investment bank founded in 1869. It is placed first on our list of 10 best undervalued dividend stocks to buy now. Goldman stock has offered investors returns exceeding 100% in the past twelve months. The firm provides investment banking, global markets research, asset and wealth management, as well as consumer management services to many clients, including governments and financial institutions around the world.
On May 7, The Goldman Sachs Group, Inc. (NYSE: GS) created a cryptocurrency trading desk to offer clients exposure to crypto investments. The firm started trading in two Bitcoin-linked derivatives after the desk became operational, media reports suggested.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Crake Asset Management is a leading shareholder in The Goldman Sachs Group, Inc. (NYSE: GS) with 158,014 shares worth more than $51 billion.
You can also take a peek at 10 Best Active Stocks to Buy Now and 10 Best Staffing Company Stocks to Buy.
