There are many ways to find investment ideas. Some useful ways 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…
There are many ways to find investment ideas. Some useful ways 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 (among the top ten stocks) that have seen the highest net purchases in dollar value by institutional investors in for the week ended 22 June 2018. They are: DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX: U11) and CapitaLand Mall Trust (SGX: C38U).
Source: Singapore Exchange; SGX Stock Facts
The first two companies on institutional investors most bought stocks are the two local banks – DBS Group and UOB.
DBS has remained the most purchased stock by institutional investors for the last few weeks. Though many reasons could have contributed towards the high interest, I think DBS’ latest strong financial performance would be one of them.
Total income for the 2018 first-quarter grew substantially by 16% from a year ago to a new record of S$3.36 billion. Net interest income (income from loans) grew 16% year-on-year to S$2.12 billion, driven by improvement in net interest margin and loan volume growth. Net profit jumped even more, by 26% to S$1.52 billion while its annualised earnings per share increased by 24% year-on-year to S$2.38.
The chief executive of DBS, Piyush Gupta, said:
“With interest rates and allowance charges reverting to more normalised levels, and our capital base streamlined with the finalisation of regulatory requirements, the structural profitability of our franchise has been more clearly demonstrated with this quarter’s results. While we are keeping a watchful eye on how geopolitical trade tensions play out, the region’s economic fundamentals remain sound. Our pipeline is healthy and we expect to continue capturing business opportunities and delivering shareholder returns in the coming year.”
Similarly, UOB has delivered a strong quarterly performance in its latest earnings update.
Total income grew 9% year-on-year to S$ 2.23 billion, of which net interest income jumped 13% year-on-year to S$1.47 billion while net fees and commission income grew 18% year-on-year to S$0.5 billion. This resulted in a 7% year-on-year increase in operating profit to S$1.24 billion. Net profit jumped by 21% year-on-year to S$0.98 billion.
Commenting on the group’s outlook, UOB’s chief executive, Wee Ee Cheong, said:
“We continue to invest in our core franchise, riding on the growing digital connectivity in the region to enhance the customer experience for consumers and businesses. For example, we are the first regional bank to establish a joint venture to provide a next-generation digital credit assessment solution to make it smarter and faster for companies to extend credit to underserved customers across ASEAN.
Despite ongoing trade tensions and financial market volatilities, we are confident of Asia’s economic fundamentals and growth potential which continue to present immense opportunities given rising urbanisation, affluence and business flows. As a long-term player with an extensive footprint and connectivity in the region, UOB is well-placed to meet our customers’ growth needs.”
The last company on the list is CapitaLand Mall Trust or CMT. As a quick introduction, CMT is a REIT that focuses on investing in income producing real estate, which is used for retail purposes.
It currently has 16 properties, which are located in the suburban areas and downtown core of Singapore. Example of properties includes Tampines Mall, Junction 8, Funan, IMM Building, Plaza Singapura, and Bugis Junction.
In the latest quarter ended 31 March 2018, CMT reported that gross revenue was up 1.8% year-on-year or S$175.2 million. Similarly, net property income (NPI) grew 4.7% year-on-year to S$125.7 million. The year-on-year improvement in gross revenue and NPI was due to “the increase was mainly due to higher occupancy for IMM Building, Clarke Quay, The Atrium@Orchard and Plaza Singapura as well as higher car park income.” Consequently, distribution per unit grew 1.8% year-on-year to 2.78 cents.
As at 31 March 2018, the retail REIT clocked a gearing ratio of 33.5% while its occupancy rate stood at 98.9%.
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. Motley Fool has recommendations for DBS Group Holdings Ltd, United Overseas Bank Ltd and CapitaLand Mall Trust.