We know that hedge funds generate strong risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Bank of Montreal (USA) (NYSE:BMO).
Bank of Montreal (USA) (NYSE:BMO) saw a slight increase in popularity among smart money investors last quarter. Among the funds in the Insider Monkey database, 16 funds held shares of Bank of Montreal at the end of September, compared to 15 investors at the end of June. At the end of this article we will also compare BMO to other stocks including FedEx Corporation (NYSE:FDX), PNC Financial Services (NYSE:PNC), and America Movil SAB de CV (ADR) (NYSE:AMX) to get a better sense of its popularity.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Hedge fund activity in Bank of Montreal (USA) (NYSE:BMO)
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, which represents an increase of 7% over the quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in BMO at the beginning of this year. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Cliff Asness’ AQR Capital Management has the most valuable position in Bank of Montreal (USA) (NYSE:BMO), worth close to $123.3 million. The second most bullish fund is Robert B. Gillam’s McKinley Capital Management, holding a $24.9 million position. Remaining hedge funds and institutional investors with similar optimism comprise Jim Simons’ Renaissance Technologies, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, some big names were breaking ground themselves. Citadel Investment Group established the biggest position in Bank of Montreal (USA) (NYSE:BMO) which had $12.2 million invested in the company at the end of the quarter. Millennium Management also initiated a $10 million position during the quarter. The following funds were also among the new BMO investors: Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors and Glenn Russell Dubin’s Highbridge Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bank of Montreal (USA) (NYSE:BMO) but similarly valued. These stocks are FedEx Corporation (NYSE:FDX), PNC Financial Services (NYSE:PNC), America Movil SAB de CV (ADR) (NYSE:AMX), and Raytheon Company (NYSE:RTN). 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 |
|---|---|---|---|
| FDX | 49 | 4031572 | 3 |
| PNC | 51 | 1891503 | 6 |
| AMX | 11 | 268831 | -2 |
| RTN | 36 | 1038218 | -2 |
As you can see these stocks had an average of 37 investors with bullish positions and the average amount invested in these stocks was $1.81 billion. That figure was $219 million in BMO’s case. PNC Financial Services (NYSE:PNC) is the most popular stock in this table, while America Movil SAB de CV (ADR) (NYSE:AMX) is the least popular one with only 11 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 PNC Financial Services (NYSE:PNC) might be a better candidate to consider taking a long position in.
Disclosure: None
