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Institutional Investors Have Been Selling These 3 Blue Chip Stocks Recently

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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 16 November 2018. They are: DBS Group Holdings Ltd (SGX: D05), Singapore Telecommunications Limited (SGX: Z74) and Oversea-Chinese Banking Corp Limited (SGX: O39).

Source: Singapore Exchange; SGX StockFacts

The first company that saw its shares sold off by institutional investors is our local bank DBS Group.

For the quarter ended 30 September 2018, DBS saw its income climb 10% from a year ago to S$3.4 billion. Net interest income went up 15% year-on-year to S$2.3 billion, driven by improvements in net interest margin and loan volume growth. Similarly, net fee income increased 1% to S$695 million, led by growth in most areas, but offset by a decline in investment banking fees. As a result, net profit jumped 72% to S$1.4 billion.

The next company that saw its shares sold off by institutions recently is our biggest local telco — Singtel.

In the latest quarter ended 30 September 2018, Singtel reported flat revenue of S$4.3 billion for FY2019’s second quarter. Yet, EBITDA (earnings before interest, taxes, depreciation, and amortisation) for the quarter declined by 10.3% year-on-year to S$1.13 billion. Singtel’s share of associates’ pre-tax earnings was also down by 49% year-on-year to S$330 million, excluding exceptional items. Consequently, Singtel’s net profit declined by 76.6% to S$667 million. Even if one-off gains and expense were removed, the telco’s underlying net profit would still be down by 21.8% year-on-year to S$715 million on the back of weaker performances in Singtel’s core businesses, and the aforementioned fall in associates’ earnings.

Nonetheless, Singtel managed to declare an interim dividend of S$0.068 per share for the reporting quarter, unchanged from a year ago.

The last company with significant net selling by institutional investors is OCBC.

For the third quarter ended 30 September 2018, OCBC reported that total income grew by 5% from a year ago to S$2.5 billion. Net interest income grew 9% year-on-year to S$1.5 billion due to broad-based growth in customer loans and an increase in net interest margin. Non-interest income, on the other hand, was flat at S$1.0 billion. Higher total income resulted in net profit going up by 12% year-on-year to a record S$1.2 billion.

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 DBS Group Holdings Ltd and Oversea-Chinese Banking Corp Limited.