Why I'm Buying Fidelity National Financial (FNF)

Investors,

I opened a position in Fidelity National Financial (FNF) last week which sounds crazy because housing is so weak. Leading into the Great Financial Crisis, FNF traded at a high of around $16/share. The stock dropped to $4.50 in 2008 and didn’t return to its 2007 high until 2013.

So why would I buy FNF right now?

1. From 2007 to January 2020 (pre-covid) shares of FNF returned 10.6% per year (incl dividends). That includes a more than 60% drop during one of the worst housing crashes in history. I don’t think we’re at the beginning of one of the worst housing crashes in history but I think investors are treating FNF like we are. FNF was trading at a blended P/E of 28 in 2007 compared to a blended P/E of 7.5 now.

   I believe the bad news and then some is already built into the share price.

2. They have grown to become the #1 title insurance company in the U.S. and rank #1 or #2 in 44 states. I believe they will get stronger through an economic downturn because of their scale.

3. Management has experienced downturns before and is focused on returning capital to shareholders through dividends and share buybacks. The dividend is currently 4.5% and they bought back roughly $550 million in shares last year. The current market cap is $10.7B so that’s a sizeable buyback.

The rest of the article covers a quick overview of FNF, notes from the company’s Q4 2022 earnings conference call, and my bear, base, and bull cases for the stock.

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