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Here's Why You Should Add Fidelity National to Your Portfolio

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Fidelity National Financial (FNF - Free Report) is well-poised for growth on prudent acquisitions, strategic investments, cost management and solid capital position.

The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 11.5% and 16.1%, respectively in the past 60 days, reflecting analysts’ optimism. Return on equity of 19.9% in the trailing twelve months was better than the industry average of 6.5%, reflecting the company’s efficiency in utilizing shareholders’ fund.

This Zacks Rank #1 (Strong Buy) company is the nation’s largest title insurance and settlement services provider, boasting leading market share in the residential purchase, refinance, and commercial markets.

It has a solid history of delivering positive earnings surprise in the last five reported quarters with the average being 18.41%.

In June 2020, Fidelity National acquired FGL Holdings, a life and annuity insurance company, to diversify from its core title insurance business and lower risk and volatility integral to its core title insurance business. The company estimates the acquisition to be more than 10% accretive to 2020 bottom line and more than 20% to 2021 bottom line. Acquisitions have been an important part of the company’s growth strategy.

Fidelity National reduced staff count by 18% in field operations and 11% in corporate environment in April in its effort to control costs during the pandemic. The company estimates about $200 million annualized savings from these actions. The insurer boasts the highest margin in the industry.

Last year, the company made strategic investments in its digital platform by expanding the WireSafe and startSafe programs. It also enhanced its core title production system technologies and integrations and advancing automated title and underwriting capabilities.

Fidelity National has been strengthening its liquidity as evident from its improving cash and investment portfolio. Moreover, the company has a credit agreement for $1 billion, 364-day delayed draw term loan.

Also, its debt to capital ratio was 14.1 at first-quarter 2020 end, better than the industry average of 21.8. Times interest earned, identifying how efficiently the company can service debt, of 22.7% is much higher than the industry average of 4.3%.

Banking on sturdy balance sheet, the company has been increasing dividend for eight straight years. Dividend yield of the company is 3.8%, higher than the industry average of 0.5%, making it an attractive investment option for yield-seeking investors.

Shares of Fidelity National have lost 32.2% year to date compared with the industry's decrease of 19%.


Further, shares of Fidelity National have been trading cheaper than the industry average. Price to earnings of 10.5X is much lower than the industry average of 23.4X, making it an attractive buying option.

Other Stocks to Consider

Investors interested in property and casualty industry may also look at Everest Re Group , The Hanover Insurance Group (THG - Free Report) and Kingstone Companies (KINS - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Everest Re provides reinsurance and insurance products in the United States, Bermuda, and internationally. It delivered average four-quarter earnings surprise of 30.89%.

The Hanover Insurance provides various property and casualty insurance products and services in the United States. It delivered average four-quarter earnings surprise of 6.19%.

Kingstone underwrites property and casualty insurance products to small businesses and individuals in New York. It delivered average four-quarter earnings surprise of 87.26%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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