Is Bank of Montreal (USA) (BMO) A Good Stock To Buy?

Is Bank of Montreal (USA) (NYSE:BMO) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Bank of Montreal (USA) (NYSE:BMO) was in 17 hedge funds’ portfolios at the end of September. BMO shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 19 hedge funds in our database with BMO positions at the end of the previous quarter. At the end of this article we will also compare BMO to other stocks including CIGNA Corporation (NYSE:CI), BCE Inc. (USA) (NYSE:BCE), and Yum! Brands, Inc. (NYSE:YUM) to get a better sense of its popularity.

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Now, we’re going to go over the recent action encompassing Bank of Montreal (USA) (NYSE:BMO).

How have hedgies been trading Bank of Montreal (USA) (NYSE:BMO)?

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Bank of Montreal (USA) (NYSE:BMO). AQR Capital Management has a $72 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Hutchin Hill Capital, led by Neil Chriss, holding a $31.4 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Israel Englander’s Millennium Management, Jim Simons’ Renaissance Technologies and Ken Griffin’s Citadel Investment Group.

Due to the fact that Bank of Montreal (USA) (NYSE:BMO) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few funds who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Ray Carroll’s Breton Hill Capital said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, comprising about $6.5 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also cut its stock, about $5.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Bank of Montreal (USA) (NYSE:BMO). These stocks are CIGNA Corporation (NYSE:CI), BCE Inc. (USA) (NYSE:BCE), Yum! Brands, Inc. (NYSE:YUM), and Avago Technologies Ltd (NASDAQ:AVGO). This group of stocks’ market values match BMO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CI 76 3239730 -2
BCE 14 247070 -5
YUM 65 5045676 6
AVGO 66 4396246 -6

As you can see these stocks had an average of 55.25 hedge funds with bullish positions and the average amount invested in these stocks was $3,232 million. That figure was $202 million in BMO’s case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand BCE Inc. (USA) (NYSE:BCE) is the least popular one with only 14 bullish hedge fund positions. Bank of Montreal (USA) (NYSE:BMO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CI might be a better candidate to consider a long position.