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Hedge Funds Are Selling Bank of Montreal (BMO)

Nina Todic

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 28, so let’s proceed with the discussion of the hedge fund sentiment on Bank of Montreal (NYSE:BMO).

Is Bank of Montreal (NYSE:BMO) a sound investment today? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions were trimmed by 2 in recent months. Our calculations also showed that BMO isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article).

If you'd ask most shareholders, hedge funds are perceived as worthless, old investment vehicles of years past. While there are greater than 8000 funds in operation today, Our researchers look at the leaders of this club, approximately 750 funds. These hedge fund managers command most of the hedge fund industry's total asset base, and by tracking their highest performing investments, Insider Monkey has revealed numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]

Noam Gottesman GLG Partners

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the new hedge fund action surrounding Bank of Montreal (NYSE:BMO).

What does smart money think about Bank of Montreal (NYSE:BMO)?

Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in BMO a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with BMO Positions

More specifically, Arrowstreet Capital was the largest shareholder of Bank of Montreal (NYSE:BMO), with a stake worth $68.5 million reported as of the end of March. Trailing Arrowstreet Capital was D E Shaw, which amassed a stake valued at $62 million. Two Sigma Advisors, Renaissance Technologies, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as Bank of Montreal (NYSE:BMO) has witnessed bearish sentiment from hedge fund managers, we can see that there is a sect of money managers that decided to sell off their positions entirely last quarter. Interestingly, Cliff Asness's AQR Capital Management dumped the biggest position of the 750 funds monitored by Insider Monkey, worth about $46.8 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund dumped about $2 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Bank of Montreal (NYSE:BMO). We will take a look at Relx PLC (NYSE:RELX), Workday Inc (NASDAQ:WDAY), The Progressive Corporation (NYSE:PGR), and Brookfield Asset Management Inc. (NYSE:BAM). This group of stocks' market values are similar to BMO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RELX,3,106280,-4 WDAY,41,1469586,8 PGR,50,1803182,6 BAM,22,806950,-4 Average,29,1046500,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1046 million. That figure was $292 million in BMO's case. The Progressive Corporation (NYSE:PGR) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 3 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -0.9% during the third 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 many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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