MENU

Why the share price of Brambles Limited and CSL Limited could head higher

Kerr Neilson is one of the founders of leading funds management business Platinum Asset Management Limited (ASX: PTM) and an investment voice certainly worth listening to.

In a recent interview with the Australian Financial Review, Neilson predicted that the Australian dollar is set to continue its downward trend and flirt with an exchange rate level of US 65 cents.

If that prediction turns out to be true it’s great news for a number of Australia-based exporters which benefit from a weaker Australian dollar.

Arguably the weaker currency would be good news for resource companies such as BHP Billiton Limited (ASX: BHP) and Newcrest Mining Limited (ASX: NCM) whose commodities are priced in US dollars. However given the relationship between the Australian dollar and commodity prices this may not be the safest way to play a declining currency.

Rather, ASX companies which enjoy pricing power would be a better bet…

Brambles Limited (ASX: BXB) earns a substantial proportion of its profits in US dollars and due to its competitive advantages also enjoys a solid level of pricing power. Conversion of profits into Australian dollars for dividends to shareholders provides a tailwind boost for shareholders.

Likewise, CSL Limited (ASX: CSL) has substantial US-dollar exposed operations and also provides investors with the added benefit of exposure to the growth dynamics of the US healthcare sector. As I noted here, the operating outlook for CSL is solid and a declining currency is simply an added benefit.

While some investors may choose to look for highly leveraged currency plays, conservative investors could be better off sticking to high quality, long term growth stories such as Brambles and CSL. These also enjoy the tailwind benefit of a weaker domestic currency but with lower associated risks.

Why These 3 Blue Chip Shares Look Set to Soar in 2016

Discover The Motley Fool's top 3 blue chips for 2016. These 3 "new breed" shares pay fully franked dividends AND offer the very real prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.