A big beneficiary of the superstrong housing market is Fidelity National Financial (FNF ), the nation's largest title insurer. Fidelity shares have leaped from 18 a year ago to nearly 30. With the housing sector expected to stay robust--thanks to low interest rates and favorable demographics--the stock should continue to fare well. Adding fuel to its upswing is recent talk that Fidelity has caught the eye of Warren Buffett, whose holding company, Berkshire Hathaway, owns a string of insurers, including General Re and Geico. Fidelity's leadership in title insurance--where Berkshire has no presence--accounts for Buffett's interest, says one New York investment strategist, who has been buying shares. Audrey Snell of investment firm Brean Murray rates the stock a strong buy solely on fundamentals. She has a 12-month target of 32. Snell figures Fidelity will earn $3.51 a share in 2002, just about matching last year's $3.54 and way ahead of 2000's $1.82.
Fidelity's title underwriters, including Chicago Title and Ticor Title Insurance, issue about 30% of all title insurance in 49 states, as well as in Canada, Mexico, Puerto Rico, and the U.S. Virgin Islands. Fidelity National also engages in escrow and other title and real estate related businesses.
One analyst who didn't want to be identified figures that, in a buyout, Fidelity, with a market cap of $2.5 billion, is worth 40 a share, or $3.4 billion. Berkshire's market value: $110 billion. Fidelity CEO Bill Foley says the company isn't for sale, but he wouldn't comment on whether Buffett called. Buffett didn't respond to a Businessweek call.
By Gene G. Marcial