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…
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 sales in dollar value by institutional investors for the week ended 13 July 2018. They are: CapitaLand Limited (SGX: C31), UOL Group Limited (SGX: U14) and Golden Agri-Resources Ltd (SGX: E5H).
Source: Singapore Exchange; SGX Stock Facts
As a quick introduction, 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 is for 2018’s first quarter. 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.”
UOL is another real estate company that saw significant selling of its shares by institutional investors in recent times. UOL has a portfolio of development and investment properties, hotels, and serviced suites.
The company’s latest earnings update happens to be for 2018’s first quarter as well. It reported a significant 89% year-on-year jump in revenue to S$661.0 million due to the consolidation of UIC Group and the associated and joint venture companies of UOL and UIC Group; the consolidation added S$316.2 million to UOL’s revenue in the reporting quarter. The higher top line could not benefit UOL shareholders though, as the company’s net profit attributable to shareholders was down by 8% to S$73.8 million.
Here are useful comments on UOL’s outlook that the company provided in its latest earnings update :
“Prices of private residential properties in Singapore are trending upwards, with prices increasing by 3.9% in first quarter 2018. Steady demand together with decreasing supply should support office rents. Notwithstanding growth in retail sales, retail rents remain under pressure with competition from ecommerce.
Economic and political uncertainties could weigh on the London property market although leasing activities remain steady in Midtown where the Group owns two properties.
Improvements in the global economic outlook should benefit the Group’s hotels in the Asia Pacific though trading conditions for the Group’s hotels in Myanmar and China remain challenging.”
Lastly, Golden Agri is an integrated palm oil company producer with oil palm plantations of over 500,000 hectares in Indonesia. It has a presence in the entire value chain of the palm oil industry, from cultivating and harvesting oil palm trees, to refining crude palm oil into consumer products such as cooking oil, margarine, and more.
Golden Agri had a difficult time in 2018’s first quarter with its revenue and underlying profit down by 11% (to US$1.82 billion) and 70% (to US$25 million), respectively, on a year-on-year basis. The weak performance was driven by lower palm oil output and low crude palm oil prices.
The challenging situation, however, is not expected to end anytime soon for Golden Agri. See the following outlook statement provided by the company:
“The Group’s operating performance will continue to be affected by the prices of CPO and competing seed oils, fluctuating foreign currency exchange rates and weather conditions. We expect the demand of palm oil to remain strong supported by global demand growth, including the implementation of the biodiesel mandate in Indonesia. The Group will continue to enhance its integrated operation capabilities to optimise profit opportunities across the value chain, as well as to improve its yield, cost efficiency and sustainability initiatives.“
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.