Is Bank of Montreal (USA) (BMO) Going to Burn These Hedge Funds?
Is Bank of Montreal (USA) (NYSE:BMO) a buy?
In the eyes of many traders, hedge funds are assumed to be useless, outdated investment tools of a period lost to current times. Although there are more than 8,000 hedge funds in operation currently, Insider Monkey aim at the masters of this club, around 525 funds. It is assumed that this group controls the lion's share of the hedge fund industry's total assets, and by tracking their highest performing investments, we've uncovered a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).
Just as useful, positive insider trading activity is a second way to look at the financial markets. Just as you'd expect, there are a number of reasons for an insider to sell shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the impressive potential of this method if shareholders know what to do (learn more here).
Furthermore, we're going to discuss the recent info surrounding Bank of Montreal (USA) (NYSE:BMO).
Hedge fund activity in Bank of Montreal (USA) (NYSE:BMO)
Heading into Q3, a total of 11 of the hedge funds we track were bullish in this stock, a change of -8% from one quarter earlier. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes considerably.
Out of the hedge funds we follow, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Bank of Montreal (USA) (NYSE:BMO). Renaissance Technologies has a $24 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Neil Chriss of Hutchin Hill Capital, with a $10.8 million position; 1.1% of its 13F portfolio is allocated to the company. Other hedge funds that are bullish include Ken Gray and Steve Walsh's Bryn Mawr Capital, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group.
Since Bank of Montreal (USA) (NYSE:BMO) has experienced a fall in interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds who were dropping their full holdings last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest position of the "upper crust" of funds we key on, valued at close to $52.9 million in stock. Matthew Tewksbury's fund, Stevens Capital Management, also dumped its stock, about $0.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
How have insiders been trading Bank of Montreal (USA) (NYSE:BMO)?
Insider buying is most useful when the company we're looking at has seen transactions within the past 180 days. Over the latest six-month time frame, Bank of Montreal (USA) (NYSE:BMO) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
We'll also review the relationship between both of these indicators in other stocks similar to Bank of Montreal (USA) (NYSE:BMO). These stocks are Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), Toronto-Dominion Bank (USA) (NYSE:TD), The Bank of Nova Scotia (USA) (NYSE:BNS), Canadian Imperial Bank of Commerce (USA) (NYSE:CM), and PNC Financial Services (NYSE:PNC). This group of stocks are in the money center banks industry and their market caps match BMO's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU)
Toronto-Dominion Bank (USA) (NYSE:TD)
The Bank of Nova Scotia (USA) (NYSE:BNS)
Canadian Imperial Bank of Commerce (USA) (NYSE:CM)
PNC Financial Services (NYSE:PNC)
Using the results demonstrated by the previously mentioned research, regular investors must always watch hedge fund and insider trading sentiment, and Bank of Montreal (USA) (NYSE:BMO) shareholders fit into this picture quite nicely.