As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Bank of Montreal (NYSE:BMO).
Is Bank of Montreal (NYSE:BMO) a splendid investment today? Hedge funds are becoming more confident. The number of long hedge fund positions moved up by 1 recently. Our calculations also showed that BMO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the latest hedge fund action regarding Bank of Montreal (NYSE:BMO).
What have hedge funds been doing with Bank of Montreal (NYSE:BMO)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 13 hedge funds with a bullish position in BMO a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Bank of Montreal (NYSE:BMO), which was worth $203.1 million at the end of the third quarter. On the second spot was GLG Partners which amassed $44.4 million worth of shares. Two Sigma Advisors, D E Shaw, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Bank of Montreal (NYSE:BMO), around 0.47% of its 13F portfolio. Cerebellum Capital is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to BMO.
Consequently, key hedge funds have jumped into Bank of Montreal (NYSE:BMO) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, established the largest position in Bank of Montreal (NYSE:BMO). Marshall Wace had $2 million invested in the company at the end of the quarter. David Andre and Astro Teller’s Cerebellum Capital also initiated a $0.5 million position during the quarter. The only other fund with a new position in the stock is Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Bank of Montreal (NYSE:BMO) but similarly valued. These stocks are Exelon Corporation (NYSE:EXC), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Kinder Morgan Inc (NYSE:KMI), and L3Harris Technologies, Inc. (NASDAQ:LHX). This group of stocks’ market values resemble BMO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXC | 34 | 2029376 | 2 |
| SMFG | 10 | 553308 | -4 |
| KMI | 33 | 1467589 | -4 |
| LHX | 48 | 2486967 | 18 |
| Average | 31.25 | 1634310 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1634 million. That figure was $393 million in BMO’s case. L3Harris Technologies, Inc. (NASDAQ:LHX) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 10 bullish hedge fund positions. Bank of Montreal (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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BMO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BMO investors were disappointed as the stock returned 5.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
