Was The Smart Money Right About Fidelity National Financial Inc (FNF)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Fidelity National Financial Inc (NYSE:FNF).

Is Fidelity National Financial Inc (NYSE:FNF) a buy here? The smart money was turning less bullish. The number of long hedge fund positions dropped by 4 in recent months. Fidelity National Financial Inc (NYSE:FNF) was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings). There were 44 hedge funds in our database with FNF positions at the end of the third quarter.

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 124 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.

Seth Klarman of Baupost Group

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

At fourth quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FNF over the last 22 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Snehal Amin’s Windacre Partnership has the largest position in Fidelity National Financial Inc (NYSE:FNF), worth close to $503.4 million, corresponding to 13.2% of its total 13F portfolio. The second most bullish fund manager is Baupost Group, led by Seth Klarman, holding a $148.5 million position; 1.4% of its 13F portfolio is allocated to the company. Other peers that hold long positions comprise Israel Englander’s Millennium Management, Farhad Nanji and Michael DeMichele’s MFN Partners and David Zorub’s Parsifal Capital 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 13.23% of its 13F portfolio. Parsifal Capital Management is also relatively very bullish on the stock, designating 8.44 percent of its 13F equity portfolio to FNF.

Because Fidelity National Financial Inc (NYSE:FNF) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few hedge funds that decided to sell off their full holdings by the end of the fourth quarter. At the top of the heap, Gilchrist Berg’s Water Street Capital dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $15 million in stock. Usman Waheed’s fund, Strycker View Capital, also cut its stock, about $7.3 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds by the end of the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Fidelity National Financial Inc (NYSE:FNF) but similarly valued. These stocks are Concho Resources Inc. (NYSE:CXO), WestRock Company (NYSE:WRK), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), Equitable Holdings, Inc. (NYSE:EQH), Appian Corporation (NASDAQ:APPN), UDR, Inc. (NYSE:UDR), and Yatsen Holding Limited (NYSE:YSG). This group of stocks’ market valuations match FNF’s market valuation.

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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 $881 million. That figure was $1337 million in FNF’s case. Equitable Holdings, Inc. (NYSE:EQH) is the most popular stock in this table. On the other hand UDR, Inc. (NYSE:UDR) is the least popular one with only 23 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 63.5. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on FNF as the stock returned 17.7% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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