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Bank of Montreal (TSE:BMO) is favoured by institutional owners who hold 51% of the company

Key Insights

  • Institutions' substantial holdings in Bank of Montreal implies that they have significant influence over the company's share price

  • 38% of the business is held by the top 25 shareholders

  • Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Bank of Montreal (TSE:BMO) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 51% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

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Let's delve deeper into each type of owner of Bank of Montreal, beginning with the chart below.

View our latest analysis for Bank of Montreal

ownership-breakdown
ownership-breakdown

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.

earnings-and-revenue-growth
earnings-and-revenue-growth

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Bank of Montreal is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 3.8% of shares outstanding. For context, the second largest shareholder holds about 3.8% of the shares outstanding, followed by an ownership of 3.6% by the third-largest shareholder.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own under 1% of Bank of Montreal in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own CA$33m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Bank of Montreal. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Bank of Montreal better, we need to consider many other factors. 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.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.