Generally it's a not sound investing strategy to buy specific shares in anticipation of an interest rate cut or other macro-economic assumption that you believe could impact the price of specific stocks.
After all, it's no secret that the RBA is odds on to cut benchmark lending rates in a couple of weeks and if you remotely subscribe to the efficient market theory then stock prices will already have adjusted to the changing expectations.
In other words shares you think may be a good buy for income because rates are going lower (say Telstra Corporation Ltd (ASX: TLS) or Sydney Airport Holdings (ASX: SYD)) may have already re-rated higher to mean you in fact end up buying high and selling low.
This is a similar principle to the idea that buying companies in tailwind sectors such as an ageing population or healthcare may be an expensive mistake as the shares are in fact overpriced relative to the companies' growth. As everyone knows the companies have tailwinds and it's already priced in or more into the valuation.
A couple of examples come to mind where I probably blundered recently include Challenger Ltd (ASX: CGF) and Ramsay Health Care Limited (ASX: RHC). Neither of which I am keen on as investments anymore.
However, one outcome we're seeing right now as a result of the revised rate outlook is the falling Australian dollar. That means the following four companies should benefit.
Corporate Travel Management Ltd (ASX: CTD) has a superb track record of revenue, profit, and dividend growth with broker Credit Suisse reportedly slapping a $30 valuation on its shares today. It's also a big beneficiary of a weaker AUD as most of its profits are earned overseas. The stock could be cheap at $25 today.
Macquarie Group Ltd (ASX: MQG) is looking better value after going ex-dividend recently and being sold off on its new CEO's cautious outlook for FY 2020's profit to be slightly below FY 2019.
In fairness no one knows where FY 2020's profit will come in now, but one thing that's for sure is that the new CEO will not want to cough up a downgrade over her first full financial year at the helm. As such the guidance is likely (but not definitely!) on the cautious side and the group is also a big beneficiary of a weaker Australian dollar alongside more liquidity in the local economy. I'd rate it a buy at $122 today.
Altium Limited (ASX: ALU) is a California-based tech business that provides the software that lets manufacturers design printed circuit boards that are contained in thousands of everyday consumer products and devices.
It reports in U.S. dollars, is growing quickly, and is well positioned to take advantage of big new trends in technology such as the Internet of Things. Even better is that it has been sold off recently to sell for $30.50 today. It looks a buy.
CSL Limited (ASX: CSL) is a US dollar earning healthcare giant I've made my top monthly stock pick a couple of times in 2019. And not for nothing either. The stock is back towards a 2019 high today and looks one of the best blue-chip growth businesses on the local market to justify its admittedly large valuation today. At $205 I'd just about also rate it a buy today.
