FNF to Underperform

We are maintaining our Sell (under-perform) recommendation on Fidelity National - Snapshot Report (FNF - Snapshot Report). Along with the declining mortgage market, the company is creating revenue streams from non-title insurance operations and reducing its cost structure. Nevertheless, the company’s mortgage operations still comprise 70% of its revenue and we believe that a likely rise in mortgage rates will accelerate the current slowdown in home sales, shrinking revenue and earnings. Although we believe FNF deserves a premium valuation to its peers, we think multiples, which are well above their historical average lows, still have room to contract as the housing market slows. On a price-earnings basis, the company is trading roughly in line with its peers. Although we believe this premium reflects the company’s superior profitability, we nevertheless believe that valuation multiples, which are well above their historical average lows, still have room to contract as the housing market slows. Our six-month price target is $37 and incorporates a multiple of 1.62x estimated book value of $22.91 as of June 30, 2006.