After a precipitous fall in the Australian dollar from US$94.50 last Tuesday to as low as US$91.61 this morning, it is timely to revisit those companies that may be beneficiaries.
This fall has been brought about by an increasingly exasperated Reserve Bank of Australia boss, Glenn Stevens, who recently stated that, "Our position has long been, and remains, that foreign exchange intervention can, judiciously used in the right circumstances, be effective and useful". This would be the first direct intervention since the collapse of Lehman Brothers.
The most recent reporting season highlighted some companies that exceeded consensus expectations. Other companies forecast even better times in the event of a lower Australian dollar. Here are two stocks that both exceeded expectations and will benefit from a falling dollar.
Sonic Healthcare (ASX: SHL) is an international medical diagnostics company, offering laboratory medicine, pathology and radiology services to the medical community. The company derives 49% of its revenue from overseas, of which North America comprises 21%. The reporting season revealed upgrades from brokers, due to a US$60 million cost-cutting program in the US, above consensus pathology margins and strong medical centre margins.
SAI Global (ASX: SAI) is the applied information services company that helps organisations manage risk, achieve compliance and drive business improvement through its information services, compliance and assurance divisions. The company derives 40% of group earnings overseas, 24% of which comes from North America. Reporting season upgrades were due to an improving growth and margin outlook. Additionally, the value is undemanding and the defensiveness of recurring revenues is a plus. An increasingly regulated world and widely dispersed supply chains constitute tailwinds for SAI Global's products and services
Other companies have been weighed down by the prevailing high Australian dollar. It should be noted that these stocks don't have the additional support of upgrades from last reporting season, but do have the advantage of being quality stocks that are well off historical highs.
The following two suggestions are more dependent on the dollar remaining at current or lower levels: Computershare (ASX: CPU) which derives 79% of its revenue from overseas, including 42% from the USA, and QBE Insurance (ASX: QBE), which derives 72% of its revenue from overseas, including 38% from the North and Latin Americas.
Foolish takeaway
The abovementioned stocks are leveraged to a falling Australian dollar and subject to ongoing falls, and may represent good entry points for acquiring stock. Ongoing falls may be accelerated should the investment community react to recent reports mentioned below.
Readers will note that I have excluded mining companies such as Rio Tinto (ASX: RIO), BHP Billiton (ASX: BHP) and Fortescue Metals Group (ASX: FMG) due to a prior article expressing reservations about China and India, which are at risk of a sudden slowdown as there is no precedent for their high growth rates being sustained.
This conclusion is the result of an influential Harvard study by President Barack Obama's former chief economic adviser Larry Summers and his colleague Lant Pritchett. Additional recent corroboration was provided by the Organization for Economic Co-operation and Development (OECD), which stated that there are rising risks of a new world financial crisis sparked by financial weakness in emerging countries, particularly Indonesia and India.
