Insider Monkey finished processing more than 738 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2019. What do these smart investors think about Bank of Montreal (NYSE:BMO)?
Bank of Montreal (NYSE:BMO) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of March. At the end of this article we will also compare BMO to other stocks including Infosys Limited (NYSE:INFY), Marsh & McLennan Companies, Inc. (NYSE:MMC), and FedEx Corporation (NYSE:FDX) to get a better sense of its popularity.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman, GLG Partners
Let’s take a look at the fresh hedge fund action encompassing Bank of Montreal (NYSE:BMO).
Hedge fund activity in Bank of Montreal (NYSE:BMO)
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in BMO a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Bank of Montreal (NYSE:BMO) was held by D E Shaw, which reported holding $95.2 million worth of stock at the end of March. It was followed by AQR Capital Management with a $46.8 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and GLG Partners.
Since Bank of Montreal (NYSE:BMO) has experienced declining sentiment from hedge fund managers, logic holds that there exists a select few funds who were dropping their positions entirely heading into Q3. Interestingly, Alec Litowitz and Ross Laser’s Magnetar Capital cut the biggest stake of all the hedgies followed by Insider Monkey, valued at close to $0.3 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $0.3 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bank of Montreal (NYSE:BMO) but similarly valued. These stocks are Infosys Limited (NYSE:INFY), Marsh & McLennan Companies, Inc. (NYSE:MMC), FedEx Corporation (NYSE:FDX), and Las Vegas Sands Corp. (NYSE:LVS). This group of stocks’ market caps match BMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INFY | 20 | 1070896 | 3 |
| MMC | 29 | 806253 | 0 |
| FDX | 41 | 2267038 | 0 |
| LVS | 37 | 1709179 | -7 |
| Average | 31.75 | 1463342 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1463 million. That figure was $334 million in BMO’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Bank of Montreal (NYSE:BMO) is even less popular than INFY. Hedge funds dodged a bullet by taking a bearish stance towards BMO. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BMO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BMO investors were disappointed as the stock returned 2.1% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
