Over the past year the S&P/ASX 200 Index (INDEXASX: XJO) has gained just 4.3%, which is a small return when you consider the risks involved with investing. However, most investors will have also gained a few extra percentage points thanks to dividends.
Looking forward, investors need a game plan if they want their portfolio to produce a return that beats the mediocre index gains of the past 12 months.
One tailwind that could be worth riding is the declining Australian currency.
The Australian dollar (AUD) has sunk to just 90 cents against the US dollar (USD). It's a swift fall from grace for the AUD which has in recent years traded above parity and as recently as June was buying US95 cents.
To really maximise your leverage to a declining AUD, it's important to understand that the decline is occurring against the US dollar, but not necessarily to the same degree against other currencies such as the British Pound or Euro.
Therefore to reap the greatest rewards from the weak exchange rate, investors should focus on identifying ASX-listed companies which earn the majority of their profits in USD.
Here are three stocks which could be worth considering.
Aristocrat Leisure Limited (ASX: ALL) is a large provider of gaming machines and services with its major operating region being the Americas. For the 12 months to 30 September 2013 the group earned over half of its revenue and profit from the Americas region. Aristocrat also recently acquired a large US-based business which further exposes the group to USD earnings.
QBE Insurance Group Ltd (ASX: QBE) recently changed its reporting currency from AUD to USD which is a pretty good indication of where the bulk of the group's revenues are coming from. The weaker exchange rate has a couple of effects in this instance. One effect is that it may reduce reported earnings due to the very profitable Australian division converting at a lower rate. However, funds available for distribution to Australian shareholders are boosted on conversion to AUD.
ResMed Inc. (CHESS) (ASX: RMD) is a market-leading manufacturer of respiratory devices. The medical device company made US$839 million in revenue from its North and Latin American division over the course of the year to 30 June 2014. That sum represents roughly half of the total sales for ResMed which also reports its results in USD.
