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Housing's fundamental outlook is relatively straightforward and not worth overthinking. The combination of higher prices and the fastest policy tightening ever has cultivated one of the most consequential affordability shocks in decades. However, the darkest hour is just before dawn, and we view the title insurance market as an attractive medium-to-long-term play on the eventual recovery in housing. Title insurance companies First American Financial Corporation (FAF) and Fidelity National Financial (FNF) have shouldered the burden of collapsing activity across both refi and purchase. As a result, both companies have spent the last year and a half focused on expense management, investment in strategic initiatives, and repositioning for a rebound in order volumes currently sitting at/near trough levels not seen since the GFC.
As the country's two largest title insurance providers, we think both companies will experience attractive upside as easier comps, rebounds in order activity, and the rollout of strategic initiatives provide tailwinds for both companies over the coming quarters. We are adjusting our positioning to reflect our long call on the title insurance market and bullish view of FAF and FNF.
Key Points of Discussion:
- A breakdown of the title insurance market and overall framework.
- A macro deep-dive into the current economic environment, housing market, and fundamental forward outlook.
- An overview of FAF and FNF's business model, market share dynamics, and company progression.
