Recall Holdings Ltd among leading stocks to profit from US dollar strength

Recall Holdings Ltd (ASX:REC) has the largest exposure to the greenback along with Westfield Corp Ltd (ASX:WFD), but the stock is sinking. Here's why…

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This should be a good day for shares with large US dollar exposure but you wouldn't have guessed it if you looked at Recall Holdings Ltd (ASX: REC).

The Australian dollar has slumped to a six-and-a-half-year low of US70 cents and should be giving the information management solutions group a nice earnings boost when it converts its US dollar earnings to Aussie dollars.

Recall has the largest US dollar exposure of stocks in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) along with Westfield Corp Ltd (ASX: WFD), and that's why it is a little surprising to see the stock tumble 2.9% to its lowest level this year of $6.67 when the broader market is down 1.3%.

Further, news that Recall has made three acquisitions to expand into key markets in the US should have given investors another reason to get excited.

But it's the collapse in the share price of US-listed Iron Mountain that is probably depressing the stock and making Iron Mountain's proposed takeover of Recall a little more complicated.

Iron Mountain is offering $8.50 a share in cash for Recall or 0.177 of its shares for each Recall share. Since the 30% fall in Iron Mountain's share price this year, Recall shareholders would only get around $7 a share if they agreed to the share swap.

This means everyone will be opting for the cash payout, but the cash payment is capped at $225 million. What this means is that most shareholders will get a little bit of cash and a lot of Iron Mountain shares. Iron Mountain will have a secondary listing on the ASX.

While the takeover is supported by Recall's board, the company is carrying on with business as usual, and that brings me back to the latest acquisition news.

Maybe most people missed that news given that Recall didn't issue an ASX release (at least not by late morning today). You would need to go to Recall's website and dig for the press release to see it.

The press release said that it expanded into two new markets – which are San Antonio, Texas, and Spartanburg, South Carolina – through the acquisition of Advanced Services, Inc. and Total Records & Information Management.

It also bought Preferred Media, a global media storage provider with locations in Chicago, Los Angeles, New Jersey and London that services the entertainment and advertising industries.

It's hard to estimate the earnings impact of the deals given that no financial details were provided, but the expansion should be a positive development as it deepens its exposure to what is probably the fastest growing developed economy in the world.

If the discount between Recall's share price and Iron Mountain's offer widens, it might be worth considering buying Recall to get a cheaper entry price to Iron Mountain.

But there are easier ways to gain exposure to stocks leveraged to the rising US dollar. There are 11 other companies on the ASX 200 that generate more than 15% of their revenue in the US, according to Bloomberg.

These include building materials suppliers Boral Limited (ASX: BLD) and James Hardie Industries plc (ASX: JHX), pesticide maker Nufarm Limited (ASX: NUF), property and construction firm Lend Lease Group (ASX: LLC), oil & gas producer AWE Limited (ASX: AWE), blood products maker CSL Limited (ASX: CSL), share registry services group Computershare Limited (ASX: CPU), drug supplier Mayne Pharma Group Ltd (ASX: MYX) and fertiliser maker Incitec Pivot Ltd (ASX: IPL) – just to name a few.

Motley Fool contributor Brendon Lau has no position in any stocks mentioned. Follow me on Twitter - https://twitter.com/brenlau

Unless otherwise noted, the author does not have a position in any stocks mentioned in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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