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Author: drnonlinear Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 265  
Subject: My favorite stock: FNF Date: 1/22/2002 8:00 PM
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Fidelity National Financial Analysis

Fidelity National Financial Inc. (NYSE: FNF) is the largest title insurance and diversified real estate related services company in the United States. The Company provides title insurance in 49 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, and in Canada and Mexico. In addition, the Company provides a broad array of escrow and other title related services, as well as real estate related services.

Current price around $25
52-week high = $33.8
52-week low = $17.9

Price is currently depressed because the residential real-estate market is seen to be slowing down following the huge refinancing boom of 2001. This is creating an investment opportunity for the patient value investor.

Morningstar Grades
Growth: A+
Profitability: A
Financial Health: A+

Valuation
Projected Earnings Growth Rate: 12%
Forward PE ratio: 8
PEG ratio: 0.67

Ratio Current Historical average
PE 8.6 12.3
P/Book 1.4 2.0
P/Sales 0.6 0.7

Expected return over next 5 years
Current EPS = $3
At 12% per year, in 5 years, EPS = $5.30
Assuming PE multiple expands to its historical average of 12 (equivalent to Fool Ratio or PEG = 1), estimated price is $63. This is better than 20% per year return. Add to it the dividend yield of 1.5% and the expected total return over the next five years is over 22% per year.

Other factors

1. FNF owns majority stakes in 2 significant companies: 79% of FNIS and 65% of MGEN. Currently this amounts to about $400 million, which is 20% of the market cap of FNF. The calculations above do not account for these stakes.

2. Dividend has grown at about 15% per year. This means over the next 5 years the yield will rise to 3% based on today's price, increasing the total return.

To recap, FNF is a financially strong steady grower with major market share in an industry currently out of favor. Currently it is my favorite.

Live long and prosper!
-dr.nonlinear-
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