Over the last two years I have repeatedly written that investors should look to position their portfolios to leverage US dollar strength, overseas earnings and a falling Australian dollar.
Whether the local dollar has much further to fall now is debatable, with a US rate hike priced in and the RBA likely to hold fire on cutting rates any further unless there's a sharp decline in the local economy.
Investors then now may want to consider what macro trends may benefit their portfolio in the 18 months ahead. Apart from the continuing yield hunt, there appears to be no gifts as generous as the dollar's recent fall, although one theme as a consequence of it is apparent.
A lower dollar encourages more international visitors and allows local companies with leverage to international tourism to gouge margins, with many overseas visitors now having spending power 20%-30% greater than two years ago.
This is all well and good, but the fundamentals of buying attractive businesses at decent valuations remain true for investors looking to benefit from the trend of a booming tourism market.
Here are a few stocks to consider.
Mantra Group Ltd (ASX: MTR) is Australia's second-largest accommodation operator and attracts over 2 million guests per year. Net profit in FY15 was $36.2 million and the group's share price is up 82% over the past year after recently hitting a record high of $4.39. It currently trades on a lofty 28x trailing earnings as investors buy into its positive outlook.
Amalgamated Holdings Limited (ASX: AHD) runs ski resorts which are likely to attract local tourists encouraged to holiday at home, while its QT Hotel chain has been a roaring success in attracting international tourists, brash business types and local holidaymakers. The stock has recently hit a record high and offers better value than Mantra at around 19x trailing earnings.
Sealink Travel Group Ltd (ASX: SLK) has doubled in value over the past year after announcing a $125 million acquisition that will make it Australia's largest marine tourism and transport company. The seafarer likely appreciates a tailwind and has enjoyed rising passenger numbers, with margin lifts thanks to its tumbling diesel fuel bill and the greater spending power of overseas visitors. This business has enjoyed a good run and investors may be better off looking elsewhere for now.
Crown Resorts Ltd (ASX: CWN) is a likely beneficiary of increasing visitor numbers and retains one of the premier tourist attractions in Melbourne with its Crown casino and entertainment complex. Moreover, Crown is betting heavily on the development of a Sydney casino and luxury hotel that it hopes will attract thousands of tourists in one of the world's premier global tourism destinations. While more international visitors are a positive for Crown its share price will be determined by the underlying performance of its multiple development projects and Melbourne operations rather than shifting tourism numbers.
Of the above stocks I would look to Amalgamated Holdings given its juicy dividend yield, growing hotel business and reasonable valuation relative to its growth prospects.
