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.
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In this article, I will look at three Singapore stocks that were among the top 10 shares that saw the highest net sales in dollar value by institutional investors in the month of September 2018. They are: Oversea-Chinese Banking Corp Limited (SGX: O39), Genting Singapore Ltd (SGX: G13) and Singapore Telecommunications Limited (SGX: Z74).
Source: SGX; SGX StockFacts
The first company that saw its shares sold off by institutional investors is our local bank 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 second company that saw its shares sold off by institutional investors was Genting Singapore. As a quick introduction, Genting Singapore is the operator of the integrated resort, Resorts World Sentosa. Among the resort’s many attractions are one of Singapore’s two casinos and the Universal Studios Singapore theme park.
In its latest earnings update, for the second quarter of 2018, Genting Singapore announced a 6.0% year-on-year decline in revenue to to S$560.3 million. But, the company still managed to eke out a 1.2% increase in operating profit to S$228.4 million, and produced a net profit attributable to shareholders of S$177.6 million, up 23.9% from a year ago.
Genting Singapore’s improvement in operating profit was due to foreign exchange gains. As for its net profit attributable to shareholders, there was a big jump in the reporting quarter due to a lack of attributable profit to holders of the company’s perpetual securities. In the second quarter of 2018, Genting Singapore’s Non-Gaming revenue inched up by 0.5% year-on-year to S$153.5 million. But that was not enough to offset an 8.2% fall in Gaming revenue to S$406.1 million.
The last company on the list is Singtel, one of the three major telcos in Singapore.
Singtel’s reveue for the quarter ended 30 June 2018 fell 0.5% year-on-year to S$4.1 billion. EBITDA (earnings before interest tax depreciation and amortisation) for the quarter tumbled 2.7% to S$1.2 billion. Net profit came down by 6.6% year-on-year to S$832 million. Excluding exceptional items, underlying net profit declined by 19.3% year-on-year to S$733 million.
The lower underlying net profit was due to weaker results from Airtel and Telkomsel, reduced economic interest in NetLink NBN Trust (SGX: CJLU), an increase in withholding taxes from higher dividends, and unfavourable currency movements. If you are keen to know what Singtel’s management has to say about its competition, you can head here.
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 Oversea-Chinese Banking Corp Limited.