Once again for Australian investors not willing to invest directly overseas it looks like 2019 could be a year relatively hard to generate decent, say double digit, total returns.
One way to help put the odds in your favour could be to look to companies that will get a profit boost if the Australian dollar depreciates further in 2019.
Of course nobody knows the future direction of currency pairs, but if we stick to the fundamentals of rising rates in the US (per the US Fed's dot plot chart) and expectations for flat rates at 1.5% in Australia then it seems likely the Australian dollar will track sideways at best in 2019.
Moreover, if the RBA is forced to cut rates on the back of falling house prices and lower-than-expected GDP growth in 2019 then I expect the Aussie could fall to US 66 cents or lower heading into 2020.
In that case these two companies would suit Australian investors as they earn the vast majority of profits in US dollars.
ResMed Inc. (CHESS) (ASX: RMD) is a business I have regularly recommended to readers over the past 4 years. And not for noting either.
The stock has nearly tripled over the past 5 years including dividends, but this is no flash in the pan small-cap spec stock that can fall as fast as it rises, ResMed is a $22.6 billion healthcare market leader in the sleep treatment space.
It's chess depositary instruments that trade on the ASX represent a 1/10th interest in its primary NYSE listing and their value rises or falls directly in line with the US / AUD spot rate. Dividends are also exchanged into Australian dollars on a quarterly basis using a spot FX rate. Shareholders directly benefit then if the Australian dollar falls.
ResMed is also looking to move into the software-as-a-service space and recently announced a research partnership with Google's healthcare division Verily to look at how it can use data to demonstrate to public healthcare providers that earlier treatment prevents more costs further down the line in a patient's treatment cycle.
ResMed shares sell for A$15.82 today and l'd wait till it reports quarterly results in February 2019 prior to investing in this business.
Macquarie Group Ltd (ASX: MQG) is another business I've regularly recommended to readers over the past five years and it has thumped the returns of the big banks and every other large-cap financial.
As I forecast its half-year result for the six-month period ending September 30, 2018 was supported by particular strength in its capital markets operations on the back of increasing volatility after an unusually docile prior corresponding half year period.
Macquarie has recently stated that a 10% fall in the AUD is estimated to have a 7% lift on Australian dollar net profit. It's forecasting profit growth around 15% for the fiscal year to March 31 2019 and looking beyond to the fiscal year ending March 31 2020 it could benefit from a weaker Australian dollar.
I'd prefer Macquarie on current valuations to ResMed.
Notably, I could have written this article (and probably did) at the end of 2016 or 2017 and been correct in my sentiment, therefore I'd suggest that investors who don't already have exposure to a weaker Australian dollar in 2019 look to get it one way or another.
