The Australian Dollar currently buys US$0.71. However, with our economy slowing and the US getting closer to its inevitable first interest rate increase (thus making it more attractive to offshore investors), it's entirely possible that the AUD will slip below US$0.70 in the next few months.
This makes it a prime time to lock in attractive foreign earnings, which convert into Australian dollars (for Australian-based companies) at a better rate. Here are my three favourite picks for the new era of a weak Australian dollar:
Westfield Corp Ltd (ASX: WFD) is a property developer with operations predominantly in the US, and also in the UK and Europe. Westfield focusses heavily on developing so-called 'flagship' shopping centres – like its Ground Zero mall at New York's World Trade Centre – which it can then leverage to achieve substantially better sales and rental outcomes than at other locations.
Although its portfolio currently consists of a mix of 'regional' and 'flagship' malls, Westfield has a number of flagship properties under development and in future years the company will derive a majority of its earnings from flagship centres.
Westfield's earnings mix will also shift over time to include more Pound Sterling and Euros compared to the predominantly USD it earns at present. While it looks to trade on a forwards Price to Earnings (P/E) ratio of approximately 22, the company has outstanding management and its flagship centres provide loads of long-term growth potential, making it great value at current prices.
Computershare Limited (ASX: CPU) is a company many investors will have a passing familiarity with, given that it is the provider of market communications on behalf of many ASX-listed companies. Computershare is an international business with operations in over 20 countries, but despite being listed in Australia it actually reports its revenue in US Dollars.
Additionally, Computershare can leverage its existing technology and systems to broaden its product offering into parallel and new businesses, which should see underlying earnings (before currency effects) increase reliably over time.
Additionally, Computershare trades on a P/E of around 13, which is below the average of the S&P/ASX 200 (INDEXASX: XJO) and its lowest price since 2013.
Last but not least, SEEK Limited (ASX: SEK) is in a fantastic position to benefit from emerging economies over the long term.
While recent weak domestic results knocked shares down to their lowest point in two years, the company's long-term growth trajectory in Brazil, Mexico, and South-East Asia is largely unaffected. Growth in emerging economies will result in more job ads and parallel employment services, putting SEEK in a very good position if it can replicate its domestic success.
More importantly, while investors often think of SEEK as a predominantly Australian business, it actually already earns more than half of its revenue from international operations. Trading on a P/E of 22 it's not conventionally 'cheap', but given its growth runway and exposure to the currencies in emerging nations I think it represents great value at today's prices.
