We recently published a list of Beyond the Tech Giants: 35 Non-Tech Opportunities in AI. In this article, we’ll look at how Fidelity National Financial, Inc. (NYSE:FNF) stacks up against other non-tech AI stocks.
Investors are desperate for a safer way to profit from the AI boom that has swept the U.S. stock market in recent months. Investment bank Goldman Sachs recently released an investor note detailing the sectors of the economy that stand to benefit from the AI craze, replacing the obvious tech bull cases with thoughtful analyses of AI’s long-term impact on utilities, manufacturing, retail and healthcare. AI tools appear poised to help companies outside the tech sector improve productivity and reduce labor costs, according to Goldman analysts. The investment titan detailed the insatiable appetite for AI, as evidenced by NVIDIA becoming one of the world’s most valuable companies over the past year, and noted that the market has yet to reward companies that have downstream exposure to AI.
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David Kostin, chief U.S. equity strategist at Goldman, wrote in the note to investors that the AI boom would likely unfold in four key phases. The first phase, the analyst said, focused on NVIDIA, the chipmaker that is at the forefront of building AI data centers. Kostin said the second phase would likely involve companies that are building AI infrastructure. Examples of this include semiconductors, data centers, networking, cloud and security, and utilities. So far this year, the returns of stocks working in these sectors have eclipsed the returns of benchmark indices. The third phase, the analyst continued, would involve companies that can integrate AI into their products and increase sales in the process. Kostin warned that these companies have lost ground to AI stocks in recent months.
The analyst said companies entering the fourth phase of the AI boom, those that would benefit from productivity gains after adopting AI, have been overlooked by the majority of the market so far. Kostin argued that it was unclear when these downstream AI stocks, some of which are detailed below, would recover and increase their earnings multiples, but stressed that it would happen eventually. The industrial sector highlights Goldman’s theory in action. Since the start of 2023, industrial stocks have jumped nearly 30% in value. Of these, companies directly exposed to AI verticals have more than doubled in value. In the fourth quarter of 2023, more than 30% of industrial companies mentioned AI in their earnings reports, compared to just 10% in the same period a year earlier.
Our methodology
For this article, we selected non-tech AI stocks based on an investor note from leading investment firm Goldman Sachs. These stocks are also popular among hedge funds. Why do we care about stocks that hedge funds invest heavily in? The reason is simple: Our research has shown that we can outperform the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Close-up of a hand signing a title insurance document on a wooden table.
Fidelity National Financial, Inc. (NYSE:FNF)
Number of hedge fund holders: 33
Fidelity National Financial, Inc. (NYSE: FNF) offers various insurance products in the United States. The company is slowly realizing the potential of artificial intelligence tools in the insurance industry. In May of this year, the company appointed Jason Nadeau as its Chief Artificial Intelligence Officer, a position created to enhance AI-driven initiatives. Nadeau, previously Chief Digital Officer, was tasked with maximizing the potential of artificial intelligence to streamline business processes and improve the customer experience. Artificial intelligence plays a key role in automating tasks such as document classification, data extraction, and customer preference tracking, which improves operational efficiency.
Fidelity National Financial, Inc. (NYSE:FNF) is widely followed on Wall Street. Keefe Bruyette recently raised his stock price target to $63 from $58 and kept a market perform rating, noting that lower insurance rates would likely spur increased refinancing activity, but that the real opportunity for title insurers would come if purchase volumes improved year over year, as the per-filing fee on residential purchase transactions was about three times that of refinancing transactions.
FNF global ranks 25th on our list of non-tech AI stocks. While we recognize FNF’s potential as an investment, our conviction lies in the belief that certain AI stocks have more promise to deliver higher returns, and in a shorter time frame. If you’re looking for an AI stock that has more promise than FNF but is trading at less than 5x earnings, check out our report on the the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.