Yahoo Finance After losing 2.1% in the past year, Bank of Montreal (TSE:BMO) institutional owners must be relieved by the recent gain
Key Insights
Given the large stake in the stock by institutions, Bank of Montreal's stock price might be vulnerable to their trading decisions
The top 25 shareholders own 39% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
If you want to know who really controls Bank of Montreal (TSE:BMO), then you'll have to look at the makeup of its share registry. With 52% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Last week's CA$2.7b market cap gain would probably be appreciated by institutional investors, especially after a year of 2.1% losses.
In the chart below, we zoom in on the different ownership groups of Bank of Montreal.
View our latest analysis for Bank of Montreal
What Does The Institutional Ownership Tell Us About Bank of Montreal?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Bank of Montreal already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Bank of Montreal's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Bank of Montreal. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 3.7% of shares outstanding. The second and third largest shareholders are BMO Asset Management Corp. and Royal Bank of Canada, Banking & Securities Investments, with an equal amount of shares to their name at 3.7%.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Bank of Montreal
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that Bank of Montreal insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own CA$30m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 48% stake in Bank of Montreal. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Bank of Montreal , and understanding them should be part of your investment process.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
