Thursday, November 29, 2007

The BMO Yo-Yo

I wasn't expecting good tidings when my RSS reader stomach-punched me with the headline "BMO earnings drop 35%" earlier this week, but such is the craziness of the stock market at the moment that it was actually received as good news.

The stock is up more than 10% since they posted their results.

The theory, I gather, is that everyone is relieved that BMO has laid their cards on the table so they can see how bad the damage is, and the results weren't as bad as anticipated (they actually beat analyst expectations) if you don't count the one-time writedowns.

So now it's onward and upward, and everyone just keeps piling back into bank stocks despite the fact that their underlying business is in the exact same condition it was this time last week, when people were running for the exits. Apparently that's what you call an efficient market.

Me? I'm standing pat. I don't have any more RRSP room for the year, and I'm in the red from my initial purchase price of $71 for BMO in April. If it's at that level or lower in March when I'll have cash and fresh contribution room, I'll throw some more in. If not, no big deal -- I'm in it for the long haul.

I can't claim to be as zen-like as Mr. Cheap is when his margin-bought dividend payers are in the red, but I'll survive.


Mr. Cheap said...

I'm wishing I could have borrowed and bought more on Tuesday (I was half tempted to sell my ROC, which is up 18% and buy BMO, which was down 18%).

I guess my greed is much stronger then my fear ;-).

5 years from now we'll all be scratching our heads trying to figure out why we didn't buy more of the banks...

Thanks for the link!

FourPillars said...

Judging from today's post, I think Mr. Cheap has more on his mind than stock prices. :)


Canadian Capitalist said...

I planned to buy BMO in two batches and I did. One at $60 and the other at $55. I didn't catch the exact bottom, but a 5% dividend yield is a huge cushion. I figure even if BMO had capital gains of only 3% over the next 20 years and the dividend stays the same, it would be a very nice investment.