Bank of Montreal (USA) (NYSE:BMO) has experienced a decrease in hedge fund sentiment in recent months.
According to most traders, hedge funds are assumed to be slow, outdated investment tools of yesteryear. While there are over 8000 funds in operation at the moment, we hone in on the bigwigs of this club, around 450 funds. It is estimated that this group oversees the lion’s share of the smart money’s total capital, and by keeping an eye on their top picks, we have spotted a number of investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Just as important, optimistic insider trading activity is a second way to break down the stock market universe. Just as you’d expect, there are a number of incentives for a bullish insider to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the impressive potential of this tactic if piggybackers understand what to do (learn more here).
Consequently, we’re going to take a glance at the recent action surrounding Bank of Montreal (USA) (NYSE:BMO).
What does the smart money think about Bank of Montreal (USA) (NYSE:BMO)?
At the end of the first quarter, a total of 12 of the hedge funds we track were long in this stock, a change of 0% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly.
When looking at the hedgies we track, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital had the biggest position in Bank of Montreal (USA) (NYSE:BMO), worth close to $52.9 million, comprising 0.4% of its total 13F portfolio. The second largest stake is held by Jim Simons of Renaissance Technologies, with a $39.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Other hedgies that are bullish include D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Neil Chriss’s Hutchin Hill Capital.
Judging by the fact that Bank of Montreal (USA) (NYSE:BMO) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of money managers who sold off their full holdings heading into Q2. It’s worth mentioning that Malcolm Fairbairn’s Ascend Capital sold off the largest investment of the “upper crust” of funds we key on, worth an estimated $7.5 million in stock., and D. E. Shaw of D E Shaw was right behind this move, as the fund dumped about $1.2 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
What have insiders been doing with Bank of Montreal (USA) (NYSE:BMO)?
Insider purchases made by high-level executives is most useful when the company we’re looking at has seen transactions within the past half-year. Over the last 180-day 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).
Let’s also take a look at hedge fund and insider activity 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 resemble BMO’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU) | 8 | 0 | 0 |
| Toronto-Dominion Bank (USA) (NYSE:TD) | 10 | 0 | 0 |
| The Bank of Nova Scotia (USA) (NYSE:BNS) | 9 | 0 | 0 |
| Canadian Imperial Bank of Commerce (USA) (NYSE:CM) | 9 | 0 | 0 |
| PNC Financial Services (NYSE:PNC) | 31 | 0 | 12 |
With the results demonstrated by the aforementioned research, retail investors must always pay attention to hedge fund and insider trading activity, and Bank of Montreal (USA) (NYSE:BMO) shareholders fit into this picture quite nicely.
