Friday, January 7, 2011

U.S. Dollar Parity Means More Opportunity South of the Border and Overseas.

The recent appreciation of the Canadian dollar versus the U.S. dollar and the Euro means that goods and services have become cheaper for Canadians who shop abroad. This holds true for people who cross the border to do some shopping, or for those who wish to make some cross-border investments.

Above is a chart of the Canadian dollar versus the U.S. dollar over recent years. Canadians can now use their high priced dollars to invest abroad and buy great international companies at reduced prices. Some examples of great international companies to buy during this period of exchange rate parity are:

Pepsi: (PEP) This is a company with a great franchise (both Frito Lay and Pepsi are great businesses with lots of customer loyalty) and a nice dividend of 2.90 percent. They increase the dividend regularly and appear to be largely immune to most fluctuations in the economy. This means that in good times and bad... they make money!

Above is Pepsi's 5 year revenue and income levels. Healthy and steady with stable profit margins.

Johnson & Johnson: (JNJ) This is a business that I recently added to my portfolio. They make drugs, medical devices, and many household products you buy in the pharmacy or grocery store. Financially, they are in great shape with little debt, and they have a dividend of 3.50 percent. They have raised this dividend every year for almost 50 years!!!! Proving that they are loyal to their shareholders and that management knows how to operate this business in tough times.

Above is JNJ's debt levels... very low for the industry.
Kimberley-Clark: (KMB) They manufacture and market various health care products worldwide. The international nature of their business is great because it helps alleviate fluctuations in any one currency or country. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional & Other, and Health Care. The stock pays 4.30 percent each year, which has increased every year for almost 40 years!! Also, this business is very defensive. This means that when the economy declines, their business tends to stay relatively positive.

So be sure to keep international opportunities in mind, especially with the Canadian dollar at historically high levels. Buy not only consumer goods in the U.S., but perhaps some stocks as well : )

No comments:

Post a Comment