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 August 2018. They are: United Overseas Bank Ltd (SGX: U11), CapitaLand Limited (SGX: C31) and Singapore Telecommunications Limited (SGX: Z74).
Source: Singapore Exchange; SGX StockFacts (as of 3 September 2018)
The first company on the list is our local bank UOB. Though many reasons could have contributed towards the high interest, I think UOB latest strong performance would be one of them. Here are some numbers from the latest earnings update for the second quarter ended 30 June 2018.
Total income grew 11% year-on-year to S$ 2.34 billion, of which net interest income jumped 14% year-on-year to S$1.54 billion whilst net fees and commission income grew 11% year-on-year to S$0.5 billion. This resulted in an 11% year-on-year increase in operating profit to S$1.32 billion. Net profit improved even more by 28% year-on-year to S$1.08 billion due to higher total income and lower loan loss provisions.
CEO Mr Wee Ee Cheong commented:
“Testament to our focus on generating sustainable growth, our second quarter results are built on the healthy growth momentum in the first quarter. Such discipline supports our ability to reward shareholders with an increase in interim dividend per ordinary share to 50 cents.
In the face of rising uncertainty globally, our stable asset quality, robust capitalisation and diversified funding base put us in a strong position to drive future growth. We will remain vigilant, nimble and continue to invest in capabilities to serve our customers’ evolving needs. As a long-term player, we remain steadfast in augmenting our regional footprint to extend our reach to a wider group of customers and to tap the region’s connectivity potential.”
Another company whose shares were bought by institutional investors lately was CapitaLand.
As a quick introduction, CapitaLand is a real estate developer and owner and is one of the largest companies on the Singapore stock market. Its diversified global real estate portfolio includes integrated developments, shopping malls, serviced residences, offices and homes.
In the latest quarter ended 30 June 2018, CapitaLand reported that revenue was up 35.3% year-on-year to S$1,342.4 million. This was mostly due to accounting changes as the group consolidated CapitaLand Mall Trust (SGX: C38U), CapitaLand Retail China Trust (SGX: AU8U) and RCS Trust (a special purpose trust that holds Raffles City Singapore) into its results.
Earnings before interest and tax increased 36.6% year-on-year. The increase was due to the consolidation activities mentioned earlier, higher contribution from newly acquired and opened properties, as well as higher fair value gains from revaluation of investment properties in Singapore, China and Europe.
The last company on the list is Singtel, one of the three local telcos.
In the company’s financial results for the first quarter ended 30 June 2018, revenue was down 0.5% year-on-year to S$4.1 billion. EBITDA (earnings before interest tax depreciation and amortisation) for the quarter declined 2.7% year-on-year to S$1.2 billion. Similarly, net profit declined 6.6% year-on-year to S$832 million. Excluding exceptional items, underlying net profit declined 19.3% year-on-year to S$733 million.
The Foolish conclusion
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 United Overseas Bank Ltd, CapitaLand Mall Trust and CapitaLand Retail China Trust.