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’ll look at two Singapore stocks (among the top ten stocks) that have seen the highest net purchases in dollar value by institutional investors for the week ended 2 August 2019. They are: DBS Group Holdings Ltd (SGX: D05) and Singapore Telecommunications Limited (SGX: Z74).
Source: Singapore Exchange; SGX Stock Facts
The company with the highest net acquisition by institutional investors last week was DBS Group. There are many good reasons for institutional investors to like the bank. To start with, the bank delivered a solid performance lately for the quarter ended 30 June 2019. Here are some high-level numbers.
Total income grew by 16% from a year ago to a record high S$3.7 billion. Net interest income (income from loans) improved by 9% year-on-year to S$2.43 billion, driven by improvement in net interest margin and loan volume growth. Net profit also strengthened by 17% to S$1.6 billion. For more details on the latest earnings, you can read about what I liked about them.
Moreover, it has paid out consistent dividends over the years, with the dividend per share (DPS) rising from 58 cents in 2014 to 120 cents in 2018 (equating to 107% growth in the last five years). The bank’s stock will be particularly appealing to investors who seek sustainable and rising dividend income, especially with its current high dividend yield of about 4.5%.
The next company here is Singapore Telecommunications Limited (SGX: Z74), or Singtel. As a quick introduction, Singtel is one of the two listed local telecoms firms – the other one being StarHub Ltd (SGX: CC3).
Singtel is due to announce its latest quarterly result this Thursday. Investors will want to know how the conglomerate is handling the challenges within its various businesses, as well as both its local and overseas investments. As a quick recap, Singtel delivered a weaker net profit in the quarter ended 31 March 2019.
Though revenue was up 2% year-on-year to S$4.3 billion, EBITDA (earnings before interest tax depreciation and amortisation) declined 5% year-on-year to S$ 1.2 billion. Similarly, underlying net profit declined 15% year-on-year to S$ 697 million.
Going forward, the market expects Singtel to continue to face significant competition in its various businesses. Yet, one good thing about the company is that dividend investors will still receive the same dividend (17.5 cents) in the current financial year despite all the challenges that it’s facing. At the current share price of S$3.30, this translates to a dividend yield of 5.3%, which is significantly higher than the Straits Times Index (SGX: STI) average yield of 3.5%.
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. The Motley Fool Singapore has recommended the shares of DBS Group Holdings.