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 16 November 2018. They are: Best World International Limited (SGX: 5ER), Wilmar International Limited (SGX: F34) and Singapore Exchange Limited (SGX: S68).
Source: Singapore Exchange; SGX StockFacts
The company with the highest net acquisition by institutional investors last week was Best World International. As a quick background, Best World is a direct-selling company that deals with a wide range of healthcare products.
For the quarter ended 30 September 2018, Best World reported that revenue improved 96.8% year-on-year to S$92.1 million. This was due to the commencement of the Franchise segment in China, as well as stronger sales performance in Taiwan. Similarly, net profit attributable to owner jumped by 145.3% year-on-year to S$29.9 million, mainly driven by higher sales revenue.
At the end of the quarter, Best World’s borrowing stood at S$2.7 million while its cash and bank balances was S$134.2 million.
Executive Director and Group Chief Operating Officer, Huang Ban Chin, said the following in the company’s earnings update:
“3Q2018 herald a new milestone for the Group’s China operations as we register the first full quarter of revenue contribution from our Franchise segment. Moving forward, we expect the China market to be the Group’s key engine for growth. We intend to capitalise on our momentum and we will work hard to further improve market awareness of our brand offerings and stimulate more demand for our products.”
The second company with significant institutional buying last week was Wilmar International. As a quick introduction, Wilmar is an agricultural company that operates through four main categories: Tropical Oil, Oilseeds and Grains, Sugar, and Others.
For the quarter ended 30 September 2018, Wilmar reported that revenue increased by 4.3% to US$11.6 billion. Net profit grew by 10.7% to US$407.4 million. This was driven by stronger performance in the Tropical Oil, and Oilseeds and Grains segments, and higher contribution from associates and joint ventures. Year to date, the group generated US$1.65 billion in net cash flow from operating activities, resulting in free cash flow of US$773.4 million.
Kuok Khoon Hong, the Chairman and CEO of the conglomerate, commented:
“Performance of the new processing plants we have invested in the past years, especially in China, Indonesia and India, continues to improve and this has helped us achieve the current good set of results. We expect most of our operations to continue to do well in the coming quarter, due to generally better processing margins. Overall, we are cautiously optimistic that performance for the rest of the year will be satisfactory.”
The last company with significant institutional buying last week was Singapore Exchange. As a quick background, Singapore Exchange Limited, or SGX for short, is the only stock exchange in Singapore. The company has three business lines, namely, Equities & Fixed Income, Derivatives, and Market Data & Connectivity.
For the quarter ended September 2018, Singapore Exchange’s revenue grew by 2.2% to S$208.9 million. Similarly, net profit attributable to shareholders improved by 0.4% to S$91.1 million. An interim dividend of S$0.075 per share was declared, 50% higher than S$0.05 per share paid out a year ago.
Loh Boon Chye, chief executive of Singapore Exchange, commented on the latest results:
“Our first-quarter performance demonstrates the diversity and resilience of our multi-asset business. We achieved strong record revenues in our derivatives business, while our securities market saw a pullback along with other regional stock markets, amid heightened volatility and emerging market weakness. During the quarter, we made strategic investments in companies that will enable us to expand our fixed income business and pursue the development of our digital marketplace for freight.”
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 a recommendation for Singapore Exchange Limited.