As commodity prices crumble and the US Federal Reserve prepares to embark on a cash rate hiking cycle later this year it's no secret that the outlook for the Australian dollar over the next 12-18 months is tough.
If the local currency steadily declines then businesses with exposure to offshore growth, international tourism, and large overseas revenues are likely to perform well in terms of capital appreciation.
Of course you have to find businesses on decent valuations, as it's useless buying a business exposed to a falling dollar if its earnings disappoint and the share price falls. Here are five to consider for potential capital gains in the years ahead.
Sealink Travel Group Ltd (ASX: SLK) is a commercial and leisure ferry operator with exposure to the twin tailwinds of a tumbling fuel bill and Aussie dollar. The seafarer's diesel bill for operating the ferries is a key overhead and a falling dollar attracts more international tourists to its ferries that sail waterways like Sydney Harbour on a daily basis.
The stock is up 26% over the past year and at $2.27 has a reasonable valuation and decent outlook.
Ansell Limited (ASX: ANN) is a manufacturer of fast-moving consumer goods (FMCG) like rubber gloves and condoms that are disposed of after use. This produces recurring sales alongside brand power, competitive advantages, and significant exposure to a falling dollar via a large proportion of sales into overseas markets.
Sydney Airport Holdings Ltd (ASX: SYD) benefits from a falling dollar as more international tourists are encouraged to visit Australia, which is a destination that has previously been seen as expensive. Locals will also be inclined to holiday at home more via domestic travel and the airport's monopoly like advantages and attractive 4.4% yield make it an attractive long-term option.
James Hardie Industries plc (ASX: JHX) is a residential and commercial building materials and construction business with significant exposure to anticipated growth in the U.S. housing market. As the largest fiber cement producer in the giant U.S. market it's an excellent option for investors looking for exposure to offshore growth with the tailwind of an appreciating U.S. dollar.
QBE Insurance Group Ltd (ASX: QBE) is probably my least favoured option out of these five due to an uncertain outlook based on volatile insurance markets and its own historical failings. However, it should receive support from U.S. rate hikes and it does have some exposure to U.S. earnings.
