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Institutional Investors Have Been Selling These 3 Blue Chip Stocks

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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 disposal in dollar value by institutional investors in for the week ended 29 June 2018. They are: Singapore Telecommunications Limited (SGX: Z74), DBS Group Holdings Ltd (SGX: D05) and Oversea-Chinese Banking Corp Limited (SGX: O39).

Source: Singapore Exchange; SGX Stock Facts (as of 29 June 2018)

We will begin with SingTel. In the company’s latest result for the quarter ended 31 March 2018, revenue was up by 0.4% year-on-year to S$4.3 billion while net profit declined 19% due mainly to weaker results from Airtel and Telkomsel and adverse currency movements.

On a full year basis, revenue rose 4.9% year-on-year to S$17.5 billion in FY2018. Net profit grew 41.5% to S$5.5 billion as a result of gains from the divestment of NetLink NBN Trust and a strong performance by its core business. Excluding such gain, underlying net profit came down 8.4% to S$3.5 billion on the back of lower share of profits from Airtel and lower economic interest in NetLink NBN Trust, and higher depreciation and amortisation on network and spectrum investments.

As we can see from the above, both the latest quarter and full year net profits were down on a year-on-year basis. As for the next financial year, SingTel provided the following guidance:

  1. Revenue to grow by low single digit.
  2. EBITDA to be stable.
  3. Cash and accrued capital expenditure to be S$ 2.2b
  4. Free cash flow to be S$ 1.9b
  5. Dividends from regional associates to be S$ 1.4b

The next two companies are our local banks. With the exception of United Overseas Bank Ltd (SGX: U11), the local banks were sold off by institutional investors lately. Interestingly, United Overseas Bank was the most bought stock by the same cohort of investors recently.

DBS delivered a strong earnings update in its latest quarter. Below are some important numbers that investors should know.

Total income 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 improvements 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.

DBS CEO 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.”

Next, in OCBC’s latest earnings update, net interest income jumped 11% year-on-year to S$1.3 billion while non-interest income grew 8% year-on-year to S$0.9 billion. There was also a 13% year-on-year increase in operating profit to S$ 1.1 billion. Net profit jumped by 29% year-on-year to S$1.1 billion.

Commenting on the Group’s performance and outlook, CEO Samuel Tsien said:

“We are pleased to report a robust set of results for the first quarter, underscored by the strong momentum of our well-diversified franchise of banking, wealth management and insurance. The Group’s income growth was broad-based, loan growth was sustained, assets under management growth continued and allowances were much lower.”

“Business sentiments have been positive, but we remain vigilant to geo-political events including increased global trade tensions and the effects of higher interest rates on investment activities and the overall economy. We will remain focused on our strategy of deepening and growing the Group’s key markets and network to support our customers.”

A Foolish Takeaway

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 and United Overseas Bank Ltd.