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 9 November 2018. They are: Oversea-Chinese Banking Corp Limited (SGX: O39), Singapore Exchange Limited (SGX: S68) and Jardine Cycle & Carriage Ltd (SGX: C07).
Source: Singapore Exchange; SGX StockFacts
The company with the highest net acquisition by institutional investors last week was our local bank 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 second company with significant institutional buying last week was Singapore Exchange, or SGX. As a quick background, SGX 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, SGX’s revenue grew by 2.2% to S$208.9 million. Operating profit was up by 0.4% to S$106.4 million. Similarly, net profit attributable to shareholders improved by 0.4% to S$91.1 million. Singapore Exchange’s diluted earnings per share remained unchanged at 8.5 cents.
An interim dividend of S$0.075 per share was declared, 50% higher than S$0.05 per share dished 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.”
Last but not least, we have Jardine Cycle & Carriage, or Jardine C&C.
As a quick introduction, Jardine C&C is a conglomerate with a diverse set of businesses, with segments such as automotive, financial services, heavy equipment and mining, agribusiness, information technology and others. These businesses are grouped into three areas, namely Astra International, Direct Motor, and Others.
For the quarter ended 30 September 2018, Jardine C&C’s revenue was up by 10% year-on-year to US$4.8 billion while operating profit grew by 26% year-on-year to US$563.2 million. Similarly, net grew by 15% year-on-year to US$542.6 million. The positive performance was driven by better performance in both Astra International and Direct Motor business. Jardine C&C’s consolidated net debt, excluding Astra’s financial services subsidiaries, was US$1.2 billion at the end of September 2018, compared to US$819 million at the end of December 2017.
Ben Keswick, chairman of Jardine C&C, commented:
“We expect the Group to achieve satisfactory full year results, notwithstanding concerns over competitive pressure in the car market and weak crude palm oil prices in Indonesia. The Group’s Direct Motor Interests and Other Strategic Interests are expected to continue to perform well.”
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 Singapore Exchange Limited.