Is Bank of Montreal (USA) (NYSE:BMO) a worthy investment today? The smart money is reducing their bets on the stock. The number of bullish hedge fund bets were trimmed by 1 recently.
If you’d ask most traders, hedge funds are assumed to be unimportant, old financial vehicles of years past. While there are more than 8000 funds trading today, we choose to focus on the masters of this group, close to 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total asset base, and by tracking their top stock picks, we have determined a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum 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 outpaced the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Just as beneficial, bullish insider trading activity is another way to parse down the stock market universe. There are a number of reasons for an executive to drop shares of his or her company, but only one, very obvious reason why they would buy. Plenty of empirical studies have demonstrated the useful potential of this tactic if piggybackers know where to look (learn more here).
Now, it’s important to take a glance at the key action encompassing Bank of Montreal (USA) (NYSE:BMO).
How are hedge funds trading Bank of Montreal (USA) (NYSE:BMO)?
Heading into 2013, a total of 10 of the hedge funds we track held long positions in this stock, a change of -9% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably.
When looking at the hedgies we track, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in Bank of Montreal (USA) (NYSE:BMO). Arrowstreet Capital has a $80 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Jim Simons of Renaissance Technologies, with a $26.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that are bullish include Malcolm Fairbairn’s Ascend Capital, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management.
Because Bank of Montreal (USA) (NYSE:BMO) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few fund managers that elected to cut their positions entirely heading into 2013. Intriguingly, David Costen Haley’s HBK Investments dropped the biggest stake of the “upper crust” of funds we watch, totaling close to $0.4 million in stock. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into 2013.
How are insiders trading Bank of Montreal (USA) (NYSE:BMO)?
Bullish insider trading is most useful when the primary stock in question has seen transactions within the past six months. Over the last half-year time frame, Bank of Montreal (USA) (NYSE:BMO) has experienced zero unique insiders purchasing, 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). All of these 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)||12||0||0|
|Toronto-Dominion Bank (USA) (NYSE:TD)||10||0||0|
|The Bank of Nova Scotia (USA) (NYSE:BNS)||12||0||0|
|Canadian Imperial Bank of Commerce (USA) (NYSE:CM)||9||0||0|
|PNC Financial Services (NYSE:PNC)||41||0||9|
With the returns exhibited by Insider Monkey’s research, retail investors should always keep an eye on hedge fund and insider trading activity, and Bank of Montreal (USA) (NYSE:BMO) applies perfectly to this mantra.