There are many ways to find investment ideas. Some useful methods are to screen for stocks or to look at a list of stocks near their 52-week lows to sieve out potential bargains. Studying what institutional investors have been buying or selling is another avenue.
Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and so on. These investors tend to possess vastly greater resources than individual investors like you and me when researching stocks. Hence, it may be useful to keep a close eye on what they are doing, as a way to generate ideas.
In this article, I will look at three Singapore stocks that were in the list of the top 10 stocks that saw the highest net purchases in dollar value by institutional investors for the week ended 8 June 2018. They are: DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39), and CapitaLand Limited (SGX: C31).
Source: Singapore Exchange; SGX Stock Facts
The first two companies on my list – DBS and OCBC – will need little introduction since both of them are amongst the three major local banks in Singapore.DBS’s latest earnings update was for 2018’s first quarter. The bank had a good quarter, as its total income marched 16% higher from a year ago to a new record of S$3.36 billion.
Net interest income (the income from loan activities) grew 16% to S$2.12 billion, driven by an improvement in DBS’s net interest margin and loan volume growth. The bank’s net profit did even better, increasing by 26% to S$1.52 billion.
In DBS’s latest earnings update, its CEO Piyush Gupta shared some useful comments on the state of the bank’s business:
“With interest rates and allowance charges reverting to more normalised levels, and our capital base streamlined with the finalisation of regulatory requirements, the structural profitability of our franchise has been more clearly demonstrated with this quarter’s results. While we are keeping a watchful eye on how geopolitical trade tensions play out, the region’s economic fundamentals remain sound. Our pipeline is healthy and we expect to continue capturing business opportunities and delivering shareholder returns in the coming year.”
In OCBC’s latest earnings update, also for the first quarter of 2018, the bank reported an 11% year-on-year jump in net interest income to S$1.3 billion, and an 8% increase in non-interest income to S$0.9 billion. The top line growth led to a 13% increase in operating profit to S$1.1 billion, which in turn resulted in the bank’s net profit growing strongly by 29% to S$1.1 billion.
OCBC’s CEO, Samuel Tsien, said in the latest earnings update that the bank’s robust results was “underscored by the strong momentum of [its] well-diversified franchise of banking, wealth management and insurance.” He added that the bank’s “income growth was broad-based, loan growth was sustained, assets under management growth continued and allowances were much lower.”
Regarding the future, Tsien commented that “business sentiments have been positive” but he’s watching macroeconomic events, such as “increased global trade tensions and the effects of higher interest rates on investment activities and the overall economy.”
Last but not least, CapitaLand is a real estate developer and owner and is one of the largest companies in Singapore’s stock market. Its diversified global real estate portfolio includes integrated developments, shopping malls, serviced residences, offices and homes.
CapitaLand’s latest earnings update happens to be for 2018’s first quarter as well. The real estate giant reported a huge 53.5% year-on-year increase in revenue to S$478.0 million, on the back of higher contributions from development projects in Singapore and China, and rental revenue from newly acquired/opened properties. A consolidation of revenues from some of the company’s real estate investment trusts also played a role.
However, CapitaLand’s profit after tax and minority interest fell by 18.8% year-on-year to S$319.1 million, mainly due to the absence of a one-off gain that came from the sale of the Nassim in 2017’s first quarter.
In CapitaLand’s latest earnings update, its CEO Lim Ming Yan, shared some comments on the company’s recent business developments:
“CapitaLand is on track to achieve our annual S$3-billion capital recycling target while we explore investment opportunities across asset classes. In 1Q 2018, we continued to optimise our portfolio by divesting 20 retail assets in China. This was followed by the proposed acquisition of Pearl Bank Apartments in Singapore and a site for our first integrated development in Vietnam. We also successfully set up our second commercial fund in the country, the US$130-million CapitaLand Vietnam Commercial Value-Added Fund, as part of growing our fee-based business.”
Looking at what institutional investors are doing could be a useful tool in your toolkit when sourcing for investment ideas. But do note that the information presented here is by no means a recommendation to take any action on the stocks mentioned. Instead, it should be viewed only as a useful starting point for further research.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for DBS Group Holdings.