Weak dollar, strong returns
A falling currency is not always a bad thing, this article will evaluate the possible ways to not only protect your investments from a weak currency but also look at ways to profit from a falling dollar.
First and foremost is to invest overseas. Many companies trade on US markets but do the majority of their business overseas in other currencies. When these corporations go to post their balance sheets, they must first convert their currency to the market currency. For example, Nike doing large portions of their business overseas means that they profit heavily when taking their European profits (Euro) back to dollars. Profits in Europe are 50% higher when converted to the US Dollar, boosting the bottom line. Favorable exchange rates hand the advantage to developing areas with ever increasing currency values. Businesses like Coca-Cola (KO) benefit from steady business at home and growing marketshare overseas.
Next, I would suggest moving your investments to corporations that do work in production, refinement or even resale of commodities. The world commodity markets are also priced in US Dollars, so a weak dollar means that other nations can buy commodities at discount rates, driving up the price for everyone else. We’ve suffered from this part of market dynamics in the price for crude oil. As the dollar fell in value, suddenly Europe and Asia could buy more oil for the same price, meaning more demand and eventually higher prices. Oil rigs are my favorite for a commodity play, I suggest Rowan Corp (RDC).
The third, and certainly more speculative investment would be to purchase stock in corporations with high cost metal mines. These corporations own mines that will only be profitable in times of high gold or silver prices. While their mines may not be turning a profit right now, when gold moves up the mines are opened and the company starts producing. This is one of the best ways to make a further hedge against the falling dollar. I like the stock Gammon Gold (GRS) for this kind of investment.