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 for the week ended 21 September 2018. They are: DBS Group Holdings Ltd (SGX: D05), Keppel Corporation Limited (SGX: BN4) and SembCorp Industries Limited (SGX: U96).
Source: SGX; SGX StockFacts (as of 21 September 2018)
The company with the highest net acquisition by institutional investors last week was our local bank DBS Group.
DBS continued its strong performance in 2018. For the second quarter ended 30 June 2018, DBS Group reported that total income increased by 10% from a year ago to S$3.20 billion. Net interest income (income from loans) rose 18% year-on-year to S$2.22 billion, driven by improvement in net interest margin and loan volume growth. Similarly, net fee income went north by 11% to S$ 706 million, led by growth in wealth management and cards. As a result, net profit jumped 20% to S$1.37 billion.
Also, DBS declared an interim dividend per share of 60 cents, up 82% from the 33 cents declared for the first half of 2017.
The second company with significant institutional buying last week was Keppel Corporation. As a quick background, Keppel is a conglomerate with major business segments such as Offshore and Marine, Property, Infrastructure, and Investment.
For the quarter ended 30 June 2018, Keppel reported that revenue was flat year-on-year at S$1.5 billion. Yet, net profit climbed 44% year-on-year to S$246.2 million. Earnings per share also rose 45% to 13.5 cents. Higher profitability was driven by strong performance in the Property and Infrastructure divisions.
In addition to the higher profitability, Keppel has improved its balance sheet with a net debt of S$4.9 billion, as at 30 June 2018, down from S$5.5 billion, as at 31 December 2017. As a result, its gearing declined to 0.4 times from 0.46 times. Moreover, the Offshore and Marine segment’s net order book (excluding Sete Brasil) grew from S$3.9 billion, as at 31 December 2017, to S$4.6 billion.
The last company on the list is Sembcorp Industries. As a quick introduction, Sembcorp Industries is a conglomerate with three major business segments: Utilities; Marine; and Urban Development & Others. The Marine segment’s contribution mainly comes from Sembcorp Industries’ 61% ownership stake in Sembcorp Marine Ltd (SGX: S51).
For the quarter ended 30 June 2018, Sembcorp Industries’ revenue improved by 47% year-on-year to S$3.34 billion. Yet, profit from operations for the quarter declined by 13% year-on-year to S$192.1 million, driven mainly by weaker performance in the Marine segment. Still, net profit attributable to shareholder jumped 47% year-on-year to S$82 million, mainly due to lower finance cost, higher share of associates and joint venture result and lower tax expenses. As of 30 June 2018, Sembcorp Industries’ net debt stood at S$ 8.3 billion, up from S$7.2 billion at end-2017.
Here’s a brief comment by Sembcorp Industries regarding its outlook:
“The market environment is expected to remain challenging in 2018. While a broader based global recovery is underway, rising trade and geopolitical challenges could potentially increase volatility and dampen global growth. The group is confident that it has the right strategies and capabilities for the future”
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 DBS Group Holdings Ltd.