ASX stocks to benefit from falling Aussie dollar

With the Aussie dollar dipping below parity with the US dollar, several stocks are set to benefit

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published May 13, 2013 11:34 am AEST

The Australian dollar briefly slipping below parity with the US dollar on Saturday, trading at 99.6 US cents, before recovering to trade at 100.6 US cents earlier this morning. Interestingly, it's almost a year to the day when the Australian dollar last slipped below parity – on 16 May 2012.

Investors may be wondering how the lower dollar affects them, and possibly how to take advantage of a potentially even lower dollar.

Several ASX listed companies benefit from a weaker currency. Those that earn significant revenues offshore or have large operations offshore, such as News Corporation (ASX: NWS), Cochlear, Computershare, CSL Limited (ASX: CSL), Aristocrat Leisure, Treasury Wine Estates (ASX: TWE) and Amcor.

Then there are those companies that benefit from competing against higher cost imports, such as steel manufacturers Arrium – ex OneSteel, BlueScope Steel as well as Select Harvest and ARB Corp. Retailers David Jones, Myer, Premier Investments, Specialty Fashion, JB Hi-Fi, Harvey Norman, GUD Holdings will also benefit as imported and offshore online products become more expensive.

Travel agent Flight Centre (ASX: FLT) will have mixed views. The lower Aussie dollar is not good news for outbound travel, but good news for its offshore operations, which now account for around 40% of revenues, and growing.

Resources companies will be among the biggest beneficiaries, with the vast majority of commodities priced in US dollars. BHP Billiton (ASX: BHP) estimates that each 1 cent change in the AUD/USD exchange rate has a $100m impact on net profits. A fall has a positive impact, while a rise has a negative impact. Likewise, major miners Rio Tinto, Fortescue Metals Group and Newcrest will all see benefits from the falling Aussie dollar.

Foolish takeaway

While it would be foolish to invest alone on the hope of the exchange rate falling further, for good companies with significant overseas operations, the lower Aussie dollar can spice up their earnings.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Motley Fool writer/analyst Mike King owns shares in several companies mentioned, including BHP, CSL, Cochlear, Computershare, JB Hi-Fi, David Jones and Flight Centre.

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