There has been plenty of debate recently as to where Australian investors should invest their money – locally or overseas.
On the one hand, the Australian share market is trading near a seven-year high, with question marks hanging over its ability to climb any higher. The Big Four banks are considered by most analysts to be heavily overpriced, while the economy is also weighted towards resource stocks which could plummet in value if commodity prices fall any further.
On the other, US equity markets are trading at never-before-seen levels and investors are often deterred by the lack of familiarity and currency risk that normally comes with international diversification. For instance, if the Australian dollar (AUD) rises in value, it can have a negative impact on investors' overall returns.
Indeed, this was demonstrated overnight with the AUD rallying past the US 80 cent mark, up nearly 3% over the last week with signs it could go even further. While the US dollar weakened as a result of weak consumer confidence and expectations that the Federal Reserve will rule out a near-term rate hike, the AUD has also strengthened upon lower expectations of an interest rate cut next week.
Here's how you can profit
Despite the AUD's rally overnight, most analysts agree that the currency is due to fall considerably in value over the coming years. In that sense, investing overseas would be a great way to profit.
If that's not something that you're comfortable doing however, there are plenty of great Australian companies which are also likely to benefit from a weaker dollar, whereby now is the time to be stocking up.
Westfield Corp Ltd (ASX: WFD) is a perfect example. Westfield Corp is the owner and operator of the Westfield brand's shopping malls in the US and UK, meaning that it generates all of its revenues overseas. When the company repatriates its earnings back to Australia, the lower exchange rate boosts its earnings in AUD-quoted terms. Westfield also boasts strong growth potential and is a great long-term bet for 'Foolish' investors.
Two more companies that would be great buys today actually operate in the rapidly growing healthcare sector. ResMed Inc. (CHESS) (ASX: RMD), which develops and manufactures products for the treatment of sleep apnea, together with CSL Limited (ASX: CSL), a global biopharmaceutical company, will both benefit from a weaker Australian dollar given that a large portion of their earnings are generated internationally.
ResMed's shares have recently taken a dive and could be the perfect candidate for investors focused on the long term.
