Kerr Neilson is one of the founders of leading funds management business Platinum Asset Management Limited (ASX: PTM) and an investment voice certainly worth listening to.
In a recent interview with the Australian Financial Review, Neilson predicted that the Australian dollar is set to continue its downward trend and flirt with an exchange rate level of US 65 cents.
If that prediction turns out to be true it's great news for a number of Australia-based exporters which benefit from a weaker Australian dollar.
Arguably the weaker currency would be good news for resource companies such as BHP Billiton Limited (ASX: BHP) and Newcrest Mining Limited (ASX: NCM) whose commodities are priced in US dollars. However given the relationship between the Australian dollar and commodity prices this may not be the safest way to play a declining currency.
Rather, ASX companies which enjoy pricing power would be a better bet…
Brambles Limited (ASX: BXB) earns a substantial proportion of its profits in US dollars and due to its competitive advantages also enjoys a solid level of pricing power. Conversion of profits into Australian dollars for dividends to shareholders provides a tailwind boost for shareholders.
Likewise, CSL Limited (ASX: CSL) has substantial US-dollar exposed operations and also provides investors with the added benefit of exposure to the growth dynamics of the US healthcare sector. As I noted here, the operating outlook for CSL is solid and a declining currency is simply an added benefit.
While some investors may choose to look for highly leveraged currency plays, conservative investors could be better off sticking to high quality, long term growth stories such as Brambles and CSL. These also enjoy the tailwind benefit of a weaker domestic currency but with lower associated risks.
