Monday, December 28, 2009

Bank of Montreal 2

The bank I am currently dealing with is the Bank of Montreal (TSX-BMO). I invested in this bank in 1983. I have only tracked it on quicken since December 1987 and since then I have made a return of 16% per year. This has not done as well for me as the Royal Bank has. My dividend yield on my original investment is just over 19% per year.

This bank also has a huge amount of insider selling. The insider selling is 52.8M and the Insider buying is 1.4M over the past year. This is not as bad as the TD or the Royal Bank in dollar amount, but it is still heavy in selling. If you compare the selling to the market cap of this stock, the selling totals .18% for this stock and this put the selling between the Royal Bank and the TD Bank. The selling has been heavy since this stock hit bottom in March 2009. Here again the selling is of options. Insiders own far more in options than in stock.

You certainly to not get a warm fuzzy feeling about buying any Canadian Bank stock when the insiders are very busy dumping their shares. However, for this bank the CFO has retained his shares and has even added to them slightly by keeping options granted. This is not something that has happened for the other banks I have reviewed.

When looking at the Ratios, I find that the P/E at 12.8 is between the 5 year average low of 11 and the 5 year average high of 16. When you look at sites that use a P/E based on the last 12 months earnings, the P/E comes in higher closer to 17.5. The current dividend yield at 5.1% is higher than the 5 year average of 4.7%. When I look at the Price/Book Value, I find the current ratio is about 80% of the 10 year average, so this points to a good price.

The last price signal to look at is the Graham Price. The Graham Price at $59.41 is some 8.4% higher than the current price. From all this, I find that all price signals, except the P/E ratio, points to a good current price. The Accrual ratio gives no particular signal, but it is a good thing that it is negative.

The Globe Investor site gives this bank a 4 star rating. This is the rating they are giving to all 5 of Canada’s large banks. When I look at analysts recommendations, I find them ranging from Strong Buy to Sell. Most of the ratings are Buy and Hold, but there are some Underperform and at least 1 sell rating and one Strong Buy rating. (See my site for information on analyst ratings.) Some analysts like the current price, some think that it is fairly priced and some think that this bank will underperform our other banks.

I am happy to hold this stock and I will continue to do so. I will not be buying any more, because I already have enough. If you do not hold this stock and you like to have it for the long term, I think that the current price is very good. I have done quite well by this stock.

BMO is a bank. They offer personal and corporate banking and wealth management services in Canada and US, which includes looking after banking, financing, investing, credit card and insurance needs. They offer mortgages and mutual funds and they offer full service and on-line brokerage services. They are international bank having banking in Canada and US. They have clients, corporate, institutional and governmental, in UK, Europe, Asia and South America. Its web site is See my spreadsheet at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets. Also, look at other investing notes on my website at

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