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 disposal in dollar value by institutional investors for the week ended 14 September 2018. They are: Hongkong Land Holdings Limited (SGX: H78), Singapore Airlines Ltd (SGX: C6L) and Venture Corporation Ltd (SGX: V03).
Source: SGX ; SGX StockFacts (data as of 14 September 2018)
The first company that saw its shares sold off by institutional investors was Hongkong Land. As a quick introduction, Hongkong Land is involved in property development, investment and management businesses in a number of cities in Asia.
In its latest half yearly earnings update, Hongkong Land announced that underlying profit attributable to shareholders declined by 3% year-on-year to US$455 million. The lower underlying profit was due to timing of sales completion in China, offset partially by higher recurring rental income from its investment properties. Its Hong Kong portfolio of 12 commercial properties’ average rental rose to HK$111 per square foot, compared to HK$106 per square foot in the corresponding period last year. The average retail rent also rose to HK$231 per square foot, compared to HK$225 per square foot on 31 December 2017. As of 30 June 2018, the property company had net debt of US$3.1 billion, up from a net debt position of US$2.5 billion at the end of 2017.
The next company that saw its shares sold off by institutions recently is Singapore Airlines, or SIA, the national airline of Singapore.
In its latest quarter earnings update ended 30 June 2018, SIA reported that revenue was flat at S$3.8 billion. Yet, operating profit fell by 52.3% year-on-year to S$193 million. The lower operating profit was mainly due to higher fuel cost. Similarly, profit attributable to shareholders fell by 58.7% year-on-year to S$139.6 million. As of 30 June 2018, SIA had a net debt of S$1.67 billion, up from S$0.56 billion, as at 31 March 2018.
In terms of its outlook, this is what the company said:
“Passenger traffic is expected to grow in the coming months, although competition in key operating markets persists. Costs remain under pressure, especially from higher fuel prices. Cargo demand in the near term is steady despite concerns over global trade tensions, the escalation of which could potentially have a longer-term impact on air cargo demand.”
The last company with significant net selling by institutional investors is Venture Corporation. The company is an electronics manufacturing services provider.
In Venture’s latest earnings update, quarterly revenue went down 6.0% year-on-year to S$952.3 million. Yet, profit attributable to shareholders was up by 40.2% year-on-year to S$97.9 million. As a result, Venture’s diluted earnings per share was up by 37.7% year-on-year to 33.6 cents. As of 30 June 2018, the company had S$688.6 million in cash on the balance sheet and S$41.7 million in loan. This gives it a net cash position of S$646.9 million, down from S$721.6 million, as at 31 December 2017.
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 Singapore has a recommendation for Hongkong Land Holdings Limited.