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 21 September 2018. They are: Oversea-Chinese Banking Corp Limited (SGX: O39), United Overseas Bank Ltd (SGX: U11) and Hongkong Land Holdings Limited (SGX: H78).
Source: SGX; SGX StockFacts (as of 21 September 2018)
The first company on the list is OCBC.
For the quarter ended 30 June 2018, OCBC reported that total income grew by 5% from a year ago to S$2.47 billion. Net interest income (income from loans) rose 8% year-on-year to S$1.45 billion, driven by improvement in net interest margin and loan volume growth. Similarly, non-interest income increased by 2% to S$1.02 billion as a result of growth across the board. Net profit jumped 16% to a record S$1.21 billion. For the quarter, OCBC declared an interim dividend per share of 20 cents, up two cents from a year ago.
The next company that saw its shares sold off by institutions recently is another local bank UOB.
For the quarter ended 30 June 2018, total income climbed by 11% year-on-year to S$2.34 billion; net interest income jumped 14% to S$1.54 billion; and net fees and commission income grew 11% to S$0.5 billion. This resulted in an 11% increase in operating profit to S$1.32 billion. Net profit grew even faster – by 28% year-on-year to S$1.08 billion due to lower loan loss provisions.
In addition, UOB declared an interim dividend per share of S$0.50 per share, up from the S$0.35 interim dividend declared for the first half of 2017.
The last company with significant net selling by institutional investors is 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 first-half 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, partially offset by higher recurring rental income from its investment properties. As of 30 June 2018, it had net debt of US$3.1 billion, up from a net debt position of US$2.5 billion at the end of 2017.
Ben Keswick, chairman of Hongkong Land, commented the following on the company’s outlook:
“The strong performance from the Group’s investment properties is expected to continue in the second half of the year, while the contribution from development properties will benefit from higher sales completions in mainland China.”
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, Oversea-Chinese Banking Corp Limited and United Overseas Bank Ltd.