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 30 November 2018. They are: DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp Limited (SGX: O39) and Best World International Limited (SGX: CGN).
Source: Singapore Exchange; SGX StockFacts
The company with the highest net acquisition by institutional investors last week was our local bank DBS Group.
For the third 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.
DBS’ chief executive, Piyush Gupta, said the following in the earnings press release:
“Third-quarter business momentum was sustained amidst heightened geopolitical and economic headwinds. Year-to-date earnings per share is the highest in our history while return on equity is the best in more than a decade. As we celebrate our fiftieth anniversary, we are pleased to be named Best Bank in the World by Global Finance and World’s Best Digital Bank by Euromoney. We are well positioned to continue capitalising on Asia’s long-term prospects while navigating short-term uncertainties.”
The second company with significant institutional buying last week was another local bank OCBC. Similarly, OCBC delivered a strong performance in its latest earnings update.
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.
Last but not least, we have 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 third 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 chief operating officer of Best World, Huang Ban Chin, commented 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.”
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 Oversea-Chinese Banking Corp Limited and DBS Group Holdings Ltd.