The Fairfax press is reporting that Kerr Neilson the boss at Platinum Asset Management Limited (ASX: PTM) is predicting falls of up to 10% for the Australian dollar versus the US dollar in the next six to eight months ahead.
The prediction is largely based on the prospect of the US Fed starting an interest rate hiking cycle from December, while the local currency will come under more pressure due to tumbling commodity prices.
This makes sense and the stronger US dollar is a theme I have repeatedly suggested investors should look to leverage through 2015.
In my opinion a significant part (around three quarters) of ASX investors’ portfolios should have exposure to a stronger US dollar and overseas earnings. Especially so given the soft growth outlook for the Australian economy – generally share prices will not rise without growth!
Below are four stocks to consider for growth, overseas exposure, and a stronger US dollar.
ResMed Inc. (CHESS) (ASX: RMD) is a global healthcare business that issues chess depositary instruments on the ASX that represent a one tenth interest in the NYSE-listed scrip. The price of the local shares therefore is directly linked to the value of the US scrip. For example with ResMed’s US scrip currently selling for US$60 if the local dollar were to fall to US60 cents ResMed shares would be valued at $10 on an FX adjusted basis. It currently sells for $8.12.
Westfield Corp Ltd (ASX: WFD) Is the business that operates huge shopping centres in the US and Europe and offers investors both yield, defensive earnigns and strong exposure to the US dollar and economic growth. Dividends are paid in US dollars prior to being exchanged into Australian dollars and as the US rate cycle moves in the opposite direction to the Australian rate cycle I expect shares will be bid up in 2016. It currently sells for $9.64 and looks a buy.
CSL Limited (ASX: CSL) is the global healthcare giant that generates more than 40% of its revenues from North America, with virtually all the rest generated overseas. As a healthcare leader CSL enjoys powerful tailwinds with huge demand for its products that are used daily by hospitals the world over to provide treatment to patients that are often in emergency wards as trauma victims. This business looks a buy at $100.
Magellan Financial Group Ltd (ASX: MFG) is the international equities fund manager that invests a large portion of funds in US equities and prices its funds in US dollars. Revenues then benefit as the US dollar rises, while anyone positive on the outlook for the US economy in 2016 should also be attracted to the business as an excellent bet on US equity markets. At $26.80 the stock is slightly expensive, but I would not be surprised if it delivered a strong 2016.