A Very Strange Divergence in Title Insurance

This is one of the few times I'd like to have ready access to analyst reports. I am completely boggled by the massive divergence among the two title insurance companies we own. While both faltered badly once interest rates started to rise (hurting mortgage applications and by transitive theory, titles), First American (FAF) has fought back to its 200 day moving average while Fidelity National Financial (FNF) has continued down at a nearly 45 degree angle, even as Treasuries have rallied here the past 5 sessions buffering the rise in mortgage rates.

Granted, the latter is more a pure play on title insurance, but this is one serious variance. There must be something going on specific to FNF and "someone" obviously knows "something" - but I definitely do not know what it is. On valuation I'd like to add here, even if its a very busted chart, but it just continued to falter almost on a daily basis and make new lows. In fact, it is lower than it was at any point in the Jan-early March 2009 selloff. I don't think almost any other stocks can make that claim.

Disclosure: Long both in fund, scratching head furtively

Comments

[igggy:]

How about the estimates for FAF are up from 90 days ago whereas they are down for FNF?

Jun 19 01:29 PM

[Stan Sutfin:]

I am long FNF and don't know why it has done so badly compared to FAF except to say that about 6 weeks ago it was reported that Doug Kass was shorting the stock. Kass as you may know is a well respected hedge fund manager (seabreaz Partners, I believe is the name) and probably has many followers. FNF has a 4.5% yield and I think will do well over the next few years because there will be a big increase in home sales and FNF is about the biggest in the title business. It is up over 5% as I write this.

Jun 19 01:39 PM

[TraderMark:]

Stan, Kass is shorting both - in fact I believe all 3 (the 3rd one starts with S, don't have it in my memory off hand - that is the tiny one, these 2 are the dominant)

igggy - correct there was a valuation gap but FAF less pure play as well. Gap completely closed now.

FNF picked up today on upgrade by RBC - glad he read my piece ;)


On Jun 19 01:39 PM Stan Sutfin wrote:

> I am long FNF and don't know why it has done so badly compared to
> FAF except to say that about 6 weeks ago it was reported that Doug
> Kass was shorting the stock. Kass as you may know is a well respected
> hedge fund manager (seabreaz Partners, I believe is the name) and
> probably has many followers. FNF has a 4.5% yield and I think will
> do well over the next few years because there will be a big increase
> in home sales and FNF is about the biggest in the title business.
> It is up over 5% as I write this.

Jun 19 04:11 PM