Over the past 12 months, we have seen remarkable gains on some of Australia’s largest corporations, including Telstra (ASX: TLS) and the big four banks as investors have sought out high yielding stocks – driving the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) up a total of 21%, despite the 5.1% retreat in May.
Other stocks have also heavily outperformed the market on the back of a strong Australian dollar. For instance, Flight Centre (ASX: FLT) has given shareholders returns of 122% in the past year, as Australians have taken advantage of cheaper international currencies for travel. However, the dollar has largely retreated from its high and is currently sitting below parity with the US dollar. Experts are predicting that its value could retreat to somewhere around 80 US cents within the next 12 months. As such, it seems appropriate to have a look at five companies that will likely benefit from the diminishing Aussie dollar.
Poker machine manufacturer Aristocrat Leisure (ASX: ALL) released its half-year report last week, announcing an 11.2% increase in net profit compared to the prior corresponding period, and expects its second half to be just as strong. Meanwhile, results from its US division were very pleasing, with sales and installations being a key driver behind its success (installations for the period grew by 8.5%). As the dollar loses its value, Aristocrat should see even heavier demand.
Coca-Cola Amatil (ASX: CCL) is one of Australia’s strongest companies with globally renowned brand names. Following a poor earnings forecast, the company’s shares plummeted and are currently sitting flat compared to their value 12 months ago. Amongst various other reasons, the company struggled to compete with imported goods due to the value of the $AU. With the value decreasing, sales are very likely to recover, which makes Coca-Cola even more mouth-watering at today’s price.
Whilst many of Australia’s blue chips have been the catalyst behind the market’s rally, analysts are suggesting the value of mining heavyweights BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) is quite attractive. Although the flailing value of iron ore is currently a concern, both companies rely heavily upon exports as a primary source of revenue, and as the exchange rate drops, demand will increase. It is well worth adding these two to your watch list (if they aren’t on there already) to wait for an even more attractive entry point.
QBE Insurance Group (ASX: QBE) is another company that is already benefiting from the lower Australian dollar, with shares now up 60% since the beginning of December. Shareholders have had to remain patient with their involvement in the company in recent years as the global financial crisis and numerous natural disasters deflated the company’s value significantly. However, those natural disasters have allowed the insurance giant to push its premiums up, which will result in higher revenues. Furthermore, with roughly 25% of its business being written in North America, the falling Australian dollar will likely continue to push shares even higher.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.