4 shares to profit from a falling Australian dollar in 2016

Macquarie Group Ltd (ASX:MQG) and Westfield Corp Ltd (ASX:WFD) shares look attractive.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Last week the Reserve Bank cut interest rates to 1.75% on the back of feeble inflation data that suggests more rate cuts may be coming throughout the rest of 2016. Indeed economists at JP Morgan and Commonwealth Bank both expect at least one more cut in 2016, with a strong possibility that rates could track towards just 1% based on the RBA's latest inflation forecasts.

If you consider that the US Fed remains firmly committed to its rate hiking cycle you don't need to be Albert Einstein to see that the Australian dollar may come under more selling pressure in 2016.

Below I have four high-quality companies that could benefit from a lower dollar as the year progresses.

Westfield Corp Ltd (ASX: WFD) Is the business that operates its eponymous shopping centres in the US and Europe. It offers investors yield, defensive earnings, 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 $10.46 and looks a buy.

Macquarie Group Ltd (ASX: MQG) is the investment bank that earns around 68% of its income offshore. It currently sells for $67 per share, which is under 11x its most recent full year earnings of $6.19 per share. An investment in its shares at these prices becomes more attractive when you consider its $2.40 per share final dividend payment is available to investors up until May 17. The bank has forecast for financial year 2017 to be roughly in line with the prior year and the shares look a buy.

Amcor Limited (ASX: AMC) is the global packaging giant that has a solid track record of earnings and dividend growth thanks to the strong global demand for its packaging products. It pulls in around US$9 billion per year in sales with North America and the high-growth emerging markets of Asia and South America pointing to a strong future. US dollar paid dividends are exchanged into Australian dollars prior to payment and investors are therefore beneficiaries of a weaker Aussie 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 shares. 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$57 if the local dollar were to fall to US57 cents ResMed shares would be valued at $10 on an FX-adjusted basis. It currently sells for $7.68 and the shares look a buy.

Motley Fool contributor Tom Richardson owns shares of Macquarie Group Limited, ResMed Inc., and Westfield. You can find Tom on Twitter @tommyr345 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.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »