Aussie dollar exposure
Team Montgomery has long warned the Australian dollar, at near parity to the US dollar, has a fair bit of downside risk (see here, here and here). With that hypothesis now playing out – and commentators starting to crow – you may be wondering which companies may benefit from a stronger US dollar.
Currency does not generally play a large role in our investment decisions, as the movements may be volatile, temporary and difficult to forecast. But when we consider that a shift in a currency is more sustainable in nature, this can lead to a material impact on the valuation of companies with international exposure (via revenues or costs).
The Australian dollar has fallen nearly 7 per cent to US$0.88 since June 2014. While we cannot forecast how low it will go, we feel that the economic forces belying this trend may continue for some time yet.
So here is a list of companies on the ASX which generate a material share of revenues in US dollars (this list is not exhaustive):
Amcor (AMC), Ansell (ANN), Aurora Oil & Gas (AUT), BHP Billiton (BHP), Brambles (BXB), Cochlear (COH), Computershare (CPU), CSL (CSL), Iluka Resources (ILU), Incitec Pivot (IPL), James Hardie Industries (JHX), Lend Lease (LLC), QBE Insurance Group (QBE), Recall Holdings (REC), ResMed (RMD), Rio Tinto (RIO), Sims Metal Management (SGM), Sirtex Medical (SRX), Sonic Healthcare (SHL), Treasury Wine Estates (TWE), UGL Limited (UGL), Worleyparsons (WOR).
Australia seems to be very good at digging things out of the ground and patching people up (and as you would surely be aware, we feel the health industry has far better prospects). By no means are we providing this list as possible investment candidates, but it may help to frame your focus.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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