When investors think about stocks that will benefit from the falling Australian dollar Sydney Airport Holdings Ltd (ASX: SYD) isn't one that readily comes to mind.
But as its latest passenger traffic numbers show, you can lump the airport operator with building materials company James Hardie Industries plc (ASX: JHX), global logistics group Brambles Limited (ASX: BXB) and medical stocks like CSL Limited (ASX:CSL) and Cochlear Limited (ASX: COH), all of which benefit from the lower Aussie dollar.
The low Australian dollar is helping to fuel the tourism trade with international arrivals increasing 3.4% last month compared with the same period last year.
The Aussie has not only been falling against the US dollar but against other Asian currencies as well, and that's encouraging Asian visitors to come to our shores.
The growth in passenger numbers from China is leading the charge with a 14.1% increase in August 2015 versus the same month last year, while those from Singapore, India and Hong Kong round out the top four with double-digit growth.
Coincidentally, tourism is one of the biggest sectors of our economy in terms of jobs growth, and that's why I have long been saying that Australia needs a weak currency if we are to ward off a recession.
The low Aussie is also providing a second tailwind to Sydney Airport. More Australians are opting to holiday domestically and this is borne out in the data with domestic passenger numbers increasing 0.8% in August.
This has pushed the total number of passengers going through Sydney airport up by 1.7% in August or 2.4% since the start of the year when compared to the same corresponding periods.
This trend is likely to continue and it's not just because of the currency. Major airlines like Qantas Airways Limited (ASX: QAN) and China Southern are increasing capacity into the nation's largest city with the former adding four weekly return flights between Sydney and Hong Kong on its refurbished A330s from late October, while the latter will start its third daily flight from Sydney to Guangzhou from December 11.
The expanded operations will add around 319,000 seats a year and that's not counting the 200,000 extra annual seats Indonesian budget carrier AirAsiaX will be adding when it commences flights from October 17, 2015.
In spite of these tailwinds, it is difficult to justify paying around a 50x price-earnings multiple on 2015-16 consensus projections for the stock, which is yielding under 5%.
Investors are clearly snapping up Sydney Airport in the hope that it will operate Sydney's second airport, even though this is still many years away.
I would be waiting for a better entry opportunity.