2025 has been a tremendous yr for traders who’ve lengthy held shares of Financial institution of Montreal (TSX:BMO) inventory. As of this writing, BMO inventory trades at $174.72 per share, up by nearly 60% from its 52-week low and by 25% year-to-date. The broader Canadian banking sector has been having fun with a powerful run throughout the identical time, however BMO inventory has outpaced the business’s returns of round 23% year-to-date.
After outperforming its closest friends, it begs to ask the query: Is it a good suggestion to put money into BMO inventory proper now, or wouldn’t it be higher to attend on the sidelines to let costs come again down earlier than shopping for extra shares?
Right now, we are going to talk about the darling Canadian banking inventory to find out what may be the higher option to go about it.
A robust yr for the financial institution
The chart above reveals precisely how nicely BMO inventory has carried out thus far this yr. It’s unmistakable that it has been on an excellent run in these previous few months, however its monitor document for the final 10 years paints a good prettier image. The compounded annual development charge (CAGR) for the inventory between 2014 and 2024 stands at round 12%, which is terrific returns for an enormous monetary establishment.
That stated, intervals of great good points additionally have a tendency to fret traders. It’s completely potential for one of the best shares in the marketplace to succeed in a degree the place development stagnates and even pulls again. That is one thing newer traders should be cautious about. Even when the inventory has been hovering this previous yr, it doesn’t imply the longer term returns will match the identical tempo. Investing in its shares at new all-time highs means you run the danger of shopping for on the peak of its efficiency cycle and dealing with losses at pullbacks which may catch you without warning.
Timing is every thing
Timing the inventory market to purchase low and promote excessive can be superb if there have been a dependable option to predict upticks and downturns. If it had been straightforward, most traders can be making it massive with well-timed trades. Nevertheless, that doesn’t imply you can’t contemplate timing in any respect.
Think about BMO inventory and the way it carried out amid the pandemic. Between the market backside in March 2020 and the height in March 2022, BMO inventory rallied by over 140%. Nevertheless, between March 2022 and September 2024, it posted a 5% destructive CAGR. For these questioning what it means, there’s a easy approach to have a look at it.
When investing in high-quality shares, it’s higher to take action in periods of underperformance. Investing when there’s loads of optimism means you danger shopping for when costs are excessive. It is extremely straightforward to be riled up and swept away by bull runs, solely to search out disappointment when the eventual pullback comes alongside.
Silly takeaway
At present ranges, BMO inventory is hovering round new all-time highs. Slashed rates of interest (with additional charge cuts on the way in which) may make it seem to be a wonderful funding. Nevertheless, there’s a danger of instability in international markets as a consequence of a number of geopolitical and macroeconomic elements. If you’re considering investing in BMO inventory, I’d advise ready on the sidelines for costs to fall.
