The arrival of Donald Trump as US president-elect has set the talking heads across the business media into over drive with predictions and analysis as to what President Trump may mean for the ASX and equity markets.
In the interests of brevity and clarity I've summarised below what I think investors should expect in the years ahead due to the Trump effect.
- Tax cuts
- Construction
- Healthcare reform
- Stronger U.S. dollar
I won't follow some pundits in suggesting the U.S. dollar is set to rocket under Trump's fiscal loosening, but I think it a sensible expectation that it could appreciate around 10% over the Australian dollar during the course of 2017.
This would take the Australian dollar to a level where it buys around 68-70 U.S. cents and will support ASX companies with substantial U.S dollar earnings. Below I have five to consider for forward-thinking investors.
Sirtex Medical Limited (ASX: SRX) is the liver cancer treatment business that is growing at double-digit rates mainly thanks to the strength of sales in its core U.S. market. Shares sell for $28.05, which looks good value, especially when you consider the potential kick ahead when the company releases the results of several clinical trials over 2017.
Magellan Financial Group Ltd (ASX: MFG) is the international equities manager that is a big beneficiary of a stronger U.S. dollar and equity markets in 2017. Moreover, it continues to deliver strong retail and institutional inflows and I expect it will reveal a big jump in total funds under management in early December. At $21.85 with a trailing 4% yield the shares look good value to me.
ResMed Inc. (CHESS) (ASX: RMD) offers investors direct exposure to a stronger U.S. dollar and continues to deliver consistent growth in revenues and earnings. Its margins have also been under pressure due to recent U.S. healthcare reforms that may be reversed under a Republican government in North America. The stock also looks decent value at $7.85.
Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) also operates in the sleep apnea space with a lot of U.S. dollar earnings thanks to the success of its operations in the world's largest healthcare market. Much of its foreign currency exposure is hedged, however, with the underlying business producing some exceptional growth it's a business to watch.
Nanosonics Ltd (ASX: NAN) is the hospital disinfectant equipment business that is growing sales strongly to public and private hospitals in the North America. In financial year 2016 it more than doubled sales to U.S. hospitals with momentum reportedly carrying on into the new financial year. It ticks the boxes as an exciting growth prospect, although with shares selling for $3.19 on a market value close to $1 billion it seems like there are some great expectations already factored into the price.
Importantly, all of these businesses have the potential to perform well over the long term irrespective of who occupies the White House or what direction the U.S. dollar takes in the years ahead. However, if Trump's fiscal policies boost inflation and lead to a higher U.S. dollar they may do especially well.
