3 stocks for a falling Aussie dollar

While we rarely give broker recommendations much weight, all three of the following companies, recommended by Charlie Aitken of Bell Potter, align nicely with with the thinking of many of our Motley Fool writers.

  • They are known to have great management teams with billionaires at the helm.
  • Each billionaire founder has retained significant stakes in the company.
  • They all fit Goldman Sachs’ number 1 investment theme for 2014, which is that companies with international earnings are set to benefit from a declining Australian dollar.
  • All have outperformed the ASX 200 by a significant margin.

1. Fortescue Metals Group (ASX: FMG)

In a prior article, I outlined why a turning point had been reached at Fortescue. Since the release of its FY2013 profit results on August 22, there had been a noticeable shift in sentiment toward this company, which has resulted in a share rally of 47%.

This was a result of consensus earnings forecasts being exceeded as a result of declining costs. By increasing production over the longer term a further reduction in unit costs across a fixed asset base were also in prospect.

Additionally, upon the profit release a surprise dividend of 10 cents was announced (4 cents expected), which indicated an increased confidence in its ability to generate cash flow going forward. This was vital to calm the markets fears mainly centred on the company’s debt. Soon after confirmation followed in the form of a repayment of $140 million of its most expensive debt, along with three global credit rating agency upgrades.

Chairman Andrew Forrest has retained a 34% ownership stake and the shares have risen 18.7% over the course of 2013.

2. Crown Resorts (ASX: CWN)

A recent report from consultancy firm Deloitte came up with the six fastest growing industries of which Australia had a competitive advantage in almost all. The tourism sector was one and Crown was set to benefit from increased patronage in Melbourne, Perth and ultimately Sydney.

While the Melbourne complex dominates Crown’s total revenue figure, it is the prospect of the rise of the middle to upper class gambler that is set to benefit operations in its Asian wide strategy, with Macau the current standout.

Chairman James Packer has retained a 50% ownership stake and the shares have risen 46.9% during 2013.

3. Platinum Asset Management (ASX: PTM).

Achieving a return on equity (ROI) of above 37% for the last financial year, this fund manager specialises in investing in global equities and derives strong cash flow from fees generated by those funds.

A consistent outperformance of indices and its local peers, including AMP (ASX: AMP) and Challenger (ASX: CGF), suggest this is not a coincidence and is set to continue under the stewardship of management who are highly incentivized to perform.

Co-founder and Managing Director Kerr Neilson has retained a 57% ownership stake and the shares have risen 61.9% during 2013.

Foolish takeaway

In my opinion, while a falling Australian dollar would provide extra impetus, it is not a prerequisite for the continued rise of these stocks.

There should be no barrier to investing in a stock that has outperformed in recent times, as long as there are sufficient reasons for this to continue. Bailing on successful investments can be the equivalent of a football coach benching his best players.


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Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.

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