Lift off: 4 shares to profit from the US Fed rate hike

The US Federal Reserve’s decision to lift interest rates overnight is important as a signal that it thinks growth and inflation are returning to a US economy that is hitting its straps once again.

Indeed, forward-looking investors should consider the potential for this to be the first rate hike in a cycle that could see the US dollar remain strong in the years ahead, especially versus commodity-linked currencies such as the Australian dollar.

ASX-focused investors then should consider companies that offer overseas exposure and US dollar earnings, especially given the soft outlook for the Australian economy in 2016. Below I have four businesses to consider for strong performance in the years ahead.

Magellan Financial Group Ltd (ASX: MFG) is an international equities manager and personal favourite given its leverage to the strength of US equities markets in 2016. Institutional revenues are lumpy but have been on a strong long-term positive trajectory, while the group’s retail distribution operations appear to be getting stronger after a bumper November. At $25 it sells for around 25x trailing earnings, with another strong year of earnings growth forecast backed up by its US leverage I expect shares might track above $30 in 2016.

Nanosonics Ltd (ASX: NAN) sells high-tech disinfectant devices to hospitals in North America and internationally across Europe, Canada, Hong Kong, Singapore and Japan. The company has $45.7 million in cash on its balance sheet to fund growth an innovative market-leading product, strong management team, and the tailwinds of the healthcare sector. This business is speculative and high up the risk curve, but perhaps worth a small position.

CSL Limited (ASX: CSL) is Australia’s leading healthcare business and recently posted a very healthy net profit of US$1,379 million, up 10% on a constant currency basis over the prior year. This kind of consistent double-digit growth from a dominant healthcare business is why shares touched a record high of $102.42 today. The business has heavy exposure to growth in the US and a substantial proportion of revenues are earned in the country. Shares are on the expensive side, but investors could consider building a position in small parcels to average out the cost.

ResMed Inc. (CHESS) (ASX: RMD) is a leading sleep treatment business that sells market-leading equipment in the US, Europe and Asia Pacific region. Its primary listing is on the NYSE and dividends are paid in US dollars before being exchanged into the Australian dollar. The shares currently sell for $7.85 which is a decent discount to highs close to $10 reached in April 2015. The business has plenty of cash to invest in new product research and remains a strong long-term prospect on a reasonable valuation.


These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

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Motley Fool contributor Tom Richardson owns shares of Magellan Financial Group and ResMed Inc..

You can find Tom on Twitter @tommyr345

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.

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