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Reasons Why You Should Buy Fidelity National (FNF) Stock

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

The Zacks Consensus Estimate for 2020 and 2021 earnings has moved up 20.6% and 29.4%, respectively in the past 30 days, reflecting analysts’ optimism.  

Return on equity of 19.6% in the trailing 12 months was better than the industry average of 6.2%, reflecting the company’s efficiency in utilizing shareholders’ funds. Its ROE has been improving since 2015.

Fidelity National is the nation’s largest title insurance and settlement services provider, boasting leading market share in the residential purchase, refinance, and commercial markets.

In its strategic efforts to diversify from core title insurance business and lower risk and volatility integral to the core title insurance business, Fidelity National acquired FGL Holdings, a life and annuity insurance company in June 2020. The company estimates the acquisition to be more than 10% accretive to 2020 bottom line and more than 20% to 2021 bottom line. FGL Holdings is a leading provider of annuity and life insurance, concentrated in the middle-income market.

Acquisitions have been an important part of the company’s growth strategy. The company acquired ServiceLink, the leading provider of centralized, residential refinance title and closing and default management services as well as the second largest loan subservicer in the industry.

The company remains focused on managing its expenses, thus generating industry-leading margins.

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.

The Zacks Consensus Estimate for 2020 and 2021 earnings indicates 15.6% and 3.2% year over year increase, respectively.

Its balance sheet strength and sustained profitability of title business poise the company well to take advantage of strategic opportunities.

This Zacks Rank #1 (Strong Buy) title insurer has increased dividend for eight straight years. Its dividend yield of nearly 4% betters the industry average of 0.5%, making it an attractive pick for yield-seeking investors.

The company has a solid track of delivering earnings surprise for six straight quarters.

Shares of Fidelity National have lost 26.2% year to date, compared with the industry's decline of 10.2%.

Shares of the company are trading at a discount than the industry average. Its forward 12-month price to earnings value of 8.3X is lower than the industry average of 24.8X. The stock carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 are the best investment bets.

Other Stocks to Consider

Some other top-ranked companies in the insurance industry include First American Financial Corporation (FAF - Free Report) , ProSight Global (PROS - Free Report) and Hallmark Financial Services (HALL - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank) stocks here.

First American Financial delivered earnings surprise of 26.51% in the last-reported quarter.

ProSight delivered earnings surprise of 129.41% in the last-reported quarter

Hallmark delivered earnings surprise of 180.00% in the last-reported quarter.

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