4 stocks to benefit from a falling Aussie dollar

A recent report highlights the substantial currency benefits for Rio Tinto Limited (ASX:RIO), BHP Billiton Limited (ASX:BHP), Cochlear Limited (ASX:COH), Newcrest Mining Limited (ASX:NCM), Santos Ltd (ASX:STO) and Western Areas Ltd (ASX:WSA).

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Unless you are planning an overseas holiday, a fall in the Aussie dollar is not necessarily a bad outcome. As investors it is potentially rewarding to invest in stocks with great fundamentals that have seen their share prices capped by the prevailing high currency.

In recent days the currency has plummeted from a high of US$94.02 to a low of US$90.92. This fall by over 3 cents represents a 3.3 % tumble. Before discussing individual stock beneficiaries, let's examine if the decline is sustainable. Many market commentators are anticipating further currency weakness as there are several factors at play including:

1. Chinese data releases indicating restrictions on credit growth which formerly underpinned investment demand.

2. A detrimental impact on Australia's terms of trade caused by the steady decline in iron ore and coal prices.

3. The final straw appears to have been a strengthening US dollar due to potential upward pressure on cash rates in the United States.

What stocks are the main beneficiaries?

In a recent article I highlighted five stocks including Rio Tinto Limited (ASX: RIO), where a 10 % fall in the Aussie dollar would result in a $515 million lift in full-year 2014 underlying earnings. Similarly, BHP Billiton Limited (ASX: BHP) gains approximately $100 million in net profits from every 1 cent fall in the currency.

The broking division of leading global bank Citigroup recently looked at the currency impact on FY2015 net profit after tax (NPAT) for Australian stocks. The parameters were a fall in the currency from US$95.00 to a low of US$88.00. In addition to BHP and Rio Tinto, some of the stocks highlighted were:

Cochlear Limited (ASX: COH) – projected NPAT currency uplift of 23%.

Fortunately the fall in the currency coincides with a surprise improvement in second half earnings during the August reporting season.

Newcrest Mining Limited (ASX: NCM) – projected NPAT currency uplift of 25%.

While the recent profit release was hampered by another big write-down (largely attributable to Lihir), the company's underlying profit was well ahead of expectations.

Santos Ltd (ASX: STO) – projected NPAT currency uplift of 19%.

The company surprised with an earlier-than-expected dividend increase. Another dividend increase is expected from the GLNG project which is converting coal seam natural gas (CSG) to liquefied natural gas (LNG) for export to global markets.

Western Areas Ltd (ASX: WSA) – projected NPAT currency uplift of 28%.

Like Santos, the dividend surprised to the upside during the reporting season. In addition, the overall result significantly exceeded market expectations.

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

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »